Brazilian CBDC Could Allegedly Allow Government to Freeze or Manipulate User Accounts

Brazil has been developing a CBDC for some time. If all goes according to plan, the digital Real will be introduced in 2024.

Once launched, it would support low-value payments for all who are inclined to use it, facilitating payments from users’ bank accounts.

Planning Ahead

However, the Brazilian CBDC would not disrupt other payment methods common in Brazil, such as Pix.

According to a spokesperson for the Brazilian government, the decision to proceed with the CBDC project was made to open new avenues for technological improvement. The digital Real could also potentially reduce the costs of loans and other customer-focused financial products, allowing banks to reach a broader customer base.

– This could reduce loan costs, improve return on investment costs. There is significant potential for new service providers, fintech, democratizing market access, and providing new services – claim officials from the Brazilian government.

Unfortunately, the current iteration of the Brazilian CBDC contains some interesting code that could allow the government to directly interfere with users’ wallets.

Possible Privacy Attack

While there is no shortage of CBDC advocates, many in the tech sphere have long been skeptical of government-backed digital currencies. According to critics, CBDCs eliminate the useful aspects of decentralization and anonymity of cryptocurrencies, essentially turning them into the same abstract figure displayed on your bank balance.

Digital currencies would therefore be subject to partial crediting and similar practices, with no real incentive for consumers to use them.

However, an overreaching government would likely be very interested in technology that would maintain a permanent and immutable record of financial transactions.

After reviewing the source code for the digital Real, developer Pedro Magalhães shared his findings on LinkedIn.

According to Magalhães, the source code contains some interesting features that would allow the government to directly freeze and unfreeze accounts, move, create, and burn CBDC tokens on someone else’s account, and transfer assets on behalf of users.

While these features could be used solely to help banks offer loans and other financial products to clients or to track financial crime, there are also much more sinister possibilities.

For now, no representative of the Brazilian government has commented on the matter.