Brazilian central bank presents progressive trial version of the digital real with controversial functions for token confiscation
Brazilian central bank presents progressive trial version of the digital real with controversial functions for token confiscation
The Brazilian central bank recently published a test version of its planned digital real. This publication caused a sensation in the crypto scene because the digital real functions contains that enable the central bank to confiscate tokens. Despite these controversy, however, the project is considered to be extremely progressive and open.
The Banco Central do Brasil has published the test kit for the digital currency on the Github platform and called on developers to search for mistakes. A blockchain developer named Pedro Magalhães has reconstructed the ERC20 smart contract, which is supposed to create the digital real. He found that the Smart Contract contains functions that enable the central bank to freeze accounts, change credit of accounts and tok or destroy access to private keys.
At first it was unclear whether these functions were only part of the test kit. However, the central bank has now confirmed that it will also be retained in the final version. This explains that courts in Brazil have the opportunity to confiscate assets in the national financial system. It is therefore required by law that the central bank must integrate such a function into the digital currency.
This feature is of course problematic for the crypto scene, but private stable coins such as Tether or USDC also contains functions. Compared to the plans of other central banks, the Brazilian project still looks progressive and realistic. While other central banks dream of displacing cryptocurrencies with its own digital currency, Banco Central do Brasil relies on coexistence between traditional currencies and cryptocurrencies. It sees its digital currency more as part of the crypto world.
The central bank uses the Hyperledger Besu platform for its project, which is completely compatible with Ethereum. Smart Contracts that run on Ethereum also work on Besu. This enables the central bank to use the developers' working hours invested in Ethereum instead of developing everything themselves.
The planned platform is based on the consensus algorithm QBFT, a variant of Proof of Authority. QBFT depends on the reputation of selected nodes and is already used by some blockchains such as the Binance Chain BNB. So far, only the central bank of Nodes and Validators will operate, but there is the possibility to integrate banks and other financial institutions later.
The President of the Brazilian Central Bank, Roberto Campois Neto, has made it clear that his main goal is not just digital payments. Rather, it is about creating a more efficient and inclusive financial system that can communicate via smart contracts with other financial systems in Brazil and worldwide. Real estate and car purchase should be accelerated by tokenized assets and smart contracts.
The Brazilian central bank also strives to compatibility with decentralized finances (Defi) on blockchains such as Ethereum, Solana and Polkadot. Their goal is that the Brazilians use the digital currency of the central bank to buy decentralized assets via defi apps. With this she wants to make the Brazilians entering the defi market.
It is important to note that a central bank cannot completely hand over your control function. However, the Brazilian central bank tries to meet the ideals of the crypto world as far as possible. By focusing on maximum compatibility with common open blockchains, she tries to optimally use existing network effects.
The Brazilian central bank plays a leading role by realizing that a digital central bank currency should not just be a digital variant of the traditional currencies. Rather, it sees the digital real as a platform for tokens or smart contracts. So she is a few years ahead of her colleagues in Frankfurt, who are still in her plans.