The Central Bank of Brazil has recently released the test code for its much-anticipated Central Bank Digital Currency (CBDC) initiative, known as the Digital Real. This preliminary code, which was shared on GitHub on July 3, offers a glimpse into the functionality and control mechanisms intended for the digital currency. However, the Bank emphasizes that the disclosed architecture may be subject to change.
A Central Bank Digital Currency (CBDC) is a type of digital currency that is issued and regulated by a country's central bank. Unlike decentralized cryptocurrencies, CBDCs are fully centralized and subject to the monetary policies and regulatory control of the issuing country's central bank. The central bank digital currency takes the form of a digital or virtual representation of the nation's fiat currency and is equivalent in value to paper currency and coins.
Digital Real's pitfalls
Pedro Magalhães, a blockchain expert, has conducted an analysis of Digital Real's smart contract code, uncovering several notable features. Within the smart contract, the researcher found the following functions:
⚖️ Access control: authorized accounts are assigned different roles (burner, minter, pauser, and mover);
⛏ Minting: Authorized accounts are allowed to create new tokens;
🔥 Burning: Tokens can be removed from circulation;
❄️ Freezing: Token balances can be temporary immobilized;
⏸ Pausing: Authorized accounts can pause and unpause token transfers.
The inclusion of these functions indicates the Central Bank's intention to extend its real-world powers into the digital realm, potentially simplifying their execution in the process. However, the exact circumstances for the employment of these features remain unspecified in the current documentation. It is anticipated that as the Digital Real project progresses, the government will define and formalize the regulatory rules and laws for its operation.
Despite the centralization and lack of anonymity inherent in CBDCs, which contradicts the principles of most digital currencies, the release of the Digital Real's code represents a significant step towards the promotion of public discussion as well as facilitating system security verification.
Also read: What are stablecoins
