Brazilian Central Bank Digital Currency Raises Alarm as Developer Uncovers Fund Freezing Feature
A blockchain developer has found a code in Brazilian central bank-backed digital currency (CBDC) that would allow the government to freeze accounts or even drain them at will.
Founder of Web3 consulting company Iora Labs and blockchain developer Pedro Magalhaes took to social media to reveal his findings in the Brazilian CBDC pilot.
Magalhaes claims to have reverse-engineered the code behind the CBDC and pilot and found a feature that would allow the government to freeze funds and adjust balances.
Brazil’s central bank posted the source code of the CBDC’s pilot project on Github earlier this month.
At the time the central bank explained that the pilot project structure is intended for use only in a test environment and is subject to additional changes later.
Local journalist Vini Barbosa confirmed Magalhaes’ findings with the country’s central bank.
Barbosa tweeted that the central confirmed plans to keep the functions that enable the monetary authority and authorized entities to freeze user accounts, change targeted addresses balances, freeze, and mint new units of the national digital currency.
Brazilian laws allow the monetary authorities to keep this feature.
“According to Brazilian legislation, the courts, in the proper conduct of legal proceedings, have the prerogative to freeze or arrest amounts held in the National Financial System (SFN). These functionalities, therefore, currently exist in the SFN and must be reproduced on the Real Digital platform in order to guarantee its compatibility with the legislation in force.”
The blockchain developer who first found this feature thought the function would only refer to DeFi or CeFi, “where it may be necessary to freeze the balances to complete a smart contract
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