Blockchain developer Pedro Magalhães has recently claimed a significant breakthrough by successfully reverse-engineering the source code of Brazil’s pilot central bank digital currency (CBDC).

His findings reveal the presence of functions that grant a central authority the power to freeze funds or adjust balances.

While these capabilities have raised concerns among experts, Magalhães argues that there may be certain scenarios in which these functions could prove advantageous.

On July 6, the Banco Central do Brazil made the source code of the digital Brazilian real pilot project available on the GitHub portal. The bank emphasized that the code was intended solely for testing purposes and subject to potential modifications.

Pedro Magalhães, a well-known blockchain developer and the founder of tech consulting firm Iora Labs, subsequently announced his successful “reverse-engineering” of the open-source code, uncovering various functions. These functions include the ability to freeze and unfreeze accounts, adjust balances, transfer currency between addresses, and create or eliminate digital real from specific addresses.

Magalhães highlighted that the code lacks explicit specifications concerning the circumstances under which tokens can be frozen and, more importantly, who possesses the authority to execute such actions.

Expressing his concerns about an institution unilaterally freezing a user’s balance, Magalhães emphasized the significant difference between decentralized finance operations and granting an institution the power to freeze funds.

However, in a recent post on July 10, Magalhães suggested that despite the apprehension surrounding Brazil’s CBDC, there could be potential benefits. He argued that a digital currency would enhance tax traceability, enabling the public to scrutinize the allocation of tax funds and monitor the government’s on-chain purchases, thereby increasing transparency in parliamentary amendments.