Brazil is on track to launch its digital currency in 2024. The digital Real is a Brazilian government-backed central bank digital currency (CBDC).
This digital money will be backed by cash in people’s bank accounts, making it a reliable and safe way to pay for goods and services. It is still in its early stages, but it has the potential to transform the way we interact with money.
The Brazilian Central Bank has taken a big step towards transparency by releasing the source code for its CBDC on GitHub. Anyone can now review the code and help ensure that it is secure and reliable.
After reviewing the source code for Brazil’s CBDC pilot, developers found that it included functionality that could be used to control individual wallets and the funds they hold. This raised concerns about the potential for government overreach and censorship.
Developers found that the smart contract included a function called “Access Control,” which could be used by the central bank to grant trusted entities administrative privileges.
The Access Control function in Brazil’s CBDC pilot is a powerful tool that could be used to control the flow of money. It allows trusted entities to mint and burn CBDC tokens at any address in the system.
Pedro Magalhaes, a full-stack developer, discovered several worrisome functions in the code. These functions could be operated by entities with Access Control authorization, which means that they could be used for malicious purposes.
The Brazilian Central Bank has acknowledged that the functions listed by Pedro Magalhães were present in the CBDC test version. The developers are still unsure if these features will be included in the final version or if they were just introduced for testing purposes.
According to the watchdog, a similar ability exists in the traditional banking system, but its use is strictly regulated by the government.
Critics in the tech sphere argue that CBDCs would remove the beneficial aspects of decentralization and anonymity from cryptocurrencies. They say that this would essentially transform CBDCs into the same abstract figure shown in your bank balance, which would defeat the purpose of using cryptocurrencies in the first place.
Some politicians in the United States are concerned that the government may use CBDCs to track and monitor people’s financial activity. The Federal Reserve has stated that it does not intend to create a CBDC at this time since the present financial system is enough for domestic transactions.