Brazil’s CBDC can freeze funds in case of fraud

by Jul 11, 2023CryptoNews0 comments

Brazil’s central bank digital currency (CBDC) pilot project has revealed some details of its source code, including a feature that allows the authorities to freeze funds in case of suspicious transactions. The code, which is available on GitHub, shows that the CBDC will use a permissioned blockchain network based on Hyperledger Fabric. The pilot project, which is expected to run until December 2022, aims to test the feasibility and impact of a CBDC in Brazil. The CBDC will be backed by the Brazilian real and will follow the same rules and regulations as the existing currency. However, unlike cash, the CBDC will have some additional functionalities, such as programmability, traceability and interoperability. One of these functionalities is the ability to freeze funds in certain scenarios, such as fraud, money laundering or terrorism financing. The code states that the CBDC network will have a “freeze” smart contract that can be invoked by authorized entities, such as the central bank or law enforcement agencies. The smart contract will check if the transaction meets certain criteria and then decide whether to freeze or unfreeze the funds. The code also specifies that the frozen funds will be transferred to a special account controlled by the central bank until the situation is resolved. The CBDC pilot project is part of Brazil’s broader digital transformation strategy, which aims to improve the efficiency and inclusiveness of the financial system. The central bank has stated that it does not intend to replace cash or existing payment methods with the CBDC, but rather to complement them and offer more options to consumers and businesses. The central bank has also said that it will respect the privacy and security of the CBDC users, while complying with the legal and regulatory frameworks.

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