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.
Brazilian Central Bank Plans To Keep The Feature In Final Product
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.”
CBDC As a Tool To Encroach On People’s Financial Freedom
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 operation.”
But the central bank’s official response is that they can do this at any time.
The developer further warned that the only way to fight the monetary authority’s excessive control over CBDC is to report it on social media.
Magalhaes said that Brazilian people have a valid reason to be scared given the country’s history.
President Fernando Collor de Mello in 1990 froze the finances of all Brazilians for over a year just two weeks after he was elected.
Several other privacy advocates have warned against CBDCs as they would grant government an unprecedented control on people’s finances.
Many are afraid that there’s a high possibility that governments will use CBDCs as a mass surveillance tool to control people.