This article is from cointelegraph.com.br and the original article can be read here in Portuguese
Real Digital will not have a device to freeze user funds and stop withdrawals, said the project coordinator at CBDC (central bank digital currency), Fábio Araújo, in a report published by Exame on Thursday, 9.
Contrary to what was widely publicized in recent days, based on the interpretation of a article authored by Araújo himself, published by the Bank of International Settlement (BIS), Real Digital’s security and consumer protection mechanism will be inspired by a system used by stock exchanges to momentarily interrupt any and all transactions in extraordinary crisis situations, known as circuit breaker:
“You won’t be able to freeze any CBDC. What the system can do is freeze a stablecoin in crisis. It’s the same mechanism used by the exchange during a crisis.”
Araújo added that the redemption of physical money will never be blocked and therefore would not affect individuals. What may happen is the freezing of transactions involving stablecoins Real Digital’s network-specific private
“The limits were designed for exchanges of Real Digital for a stablecoinor the opposite, of a stablecoin for Real Digital. Now, the switch to the real ‘physical’ can be done at any time, without any hindrance.”
According to the coordinator of the Real Digital project, there was a generalized failure to interpret a specific part of the document. He also added that this is a preliminary version of the text, whose fundamental purpose is precisely to promote and broaden debates on the subject. Araújo projected that the technical and financial guidelines of the Brazilian CBDC should only be defined in the second half of 2024.
Recently, the central bank announced the postponement of the first Real Digital tests. Initially scheduled to take place later this year, they were postponed to next year.
Still defending himself from the criticism that fell on the BC proposal, Araújo stressed that financial systems need safety mechanisms to protect users from human or cyber attacks:
“As in the case of Pix, in which society requested and the Central Bank included certain limits. Daily limits for withdrawals, for example, help with security. Imagine if you are the victim of a hacker attack. Without protection, they can clean your account .”
To justify the implementation of a security mechanism along the lines proposed by the Central Bank, Araújo used as an example the case of the collapse of algorithmic stablecoin TerraUSD (USTC), whose loss of parity with the dollar ended up triggering a death spiral in the DeFi (decentralized finance) protocol Terra Classic (LUNC). As a result, in less than a week, US$ 40 billion was pulverized from cryptocurrencies causing huge losses for many small investors.
“If it were a regulated stablecoin, in a regulated market, trading would be interrupted, which would give time to understand the event and eventually recover part of the amount that people had invested,” he explained.
Privacy
Araújo also revealed that the Central Bank has been carrying out studies to develop a system that maintains the privacy of bank deposits at current levels. One of the main criticisms of CBDCs, especially those originating from the cryptocurrency community, concerns the full state control over citizens’ financial transactions.
However, Araújo ruled out the possibility that Real Digital incorporates anonymity and anti-censorship features of cryptocurrencies such as Bitcoin (BTC). According to the coordinator of the Brazilian CBDC, such an option would make it difficult to combat financial crimes:
“Some people involved with Bitcoin and crypto have ideological issues, they would like complete anonymity, but that makes it difficult to prevent money laundering, financing terrorism. The degree of privacy that we have today guarantees the possibility of fighting these crimes.”
The Real Digital has been debated by the Central Bank since 2015 and should be implemented through solutions presented by private companies during the Lift Challenge – a kind of laboratory for the development of products, services and technical infrastructure promoted and supervised by the BC.
The BC’s intention with the launch of the Brazilian CBDC is to enable a smart payment system based on smart contracts, Internet of Things-oriented payments, and decentralized finance instruments.
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