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The Brazilian Central Bank’s Digital Real promises to modernize transactions, but experts warn of the risk of total government control over citizens’ assets. The Brazilian digital currency could facilitate direct tax breaks and even account freezes.
The Digital Real of central bank promises to modernize transactions, but experts warn of the risk of total government control over citizens' assets.
Brazil's digital currency could facilitate direct tax breaks and even account freezes, raising questions about financial freedom and privacy in Brazil.
The development of a Brazilian digital currency, called Real Digital, puts the government in a position to control citizens' financial lives like never before.
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With the implementation of this new system by the Central Bank of Brazil (Bacen), concerns arise about privacy, freedom and even the future of the personal and collective economy.
What if the government had the power to monitor, control and even block access to your money? This is one of the questions that the Real Digital pilot raises.
The Digital Real and the potential for state control
According to the Central Bank, the Real Digital is an electronic version of the real that promises to simplify transactions, but, as announced, it also allows the government monitor investments, expenses and financial transactions of each citizen.
The system prototype suggests functionalities that go far beyond the offerings of traditional banks and payment platforms, including automatic transfers and direct tax discounts on personal accounts.
The Central Bank can thus even define how long funds can be held in accounts or freeze funds unilaterally.
These capabilities were revealed on GitHub, a platform for developers where Bacen published the Real Digital code on July 3.
Unlike cryptocurrencies like Bitcoin and Ethereum, where users have direct control over their wallets, Real Digital centralizes power in the Central Bank, which can define rules for the use and maintenance of users' balances.
A currency with no issuance limits?
Another highlight is that the Digital Real does not have limits on its creation, unlike conventional cryptocurrencies, which have clear rules for their issuance.
This would allow the Central Bank to “print” digital currency without the need for collateral., which, in economic terms, could generate imbalances and even digital inflation.
As described by experts, the Real Digital system offers an unprecedented level of financial tracking and monitoring, something that raises concerns about the use of this technology.
International example: financial control in the name of order
Cases of financial restrictions for political reasons are already a reality outside Brazil.
In 2022, PayPal suspended the account of the Free Speech Union, a British organization that defends freedom of expression, without clear justification.
In Canada, Prime Minister Justin Trudeau ordered the freezing of bank accounts of protesters demonstrating against the Covid-19 vaccine passport, blocking cards and seizing funds.
These actions illustrate the risk that, in the future, political decisions could directly impact citizens’ financial lives.
Full control or security for users?
The functionalities of Real Digital raise comparisons with surveillance systems imagined in social control dystopias.
Developer Pedro Magalhães, a Blockchain specialist and co-founder of Iora Labs, was the first to notice these characteristics in the Central Bank project, and compared the system to a kind of master key that would give the government unrestricted access to citizens' assets.
In the Bitcoin and Ethereum system, for example, the user has the key to manage his own account, but in the case of Real Digital, this autonomy would be replaced by state control.
The Bitcoin Portal confirmed Magalhães' claims with other developers, who validated the presence of these features in the pilot project.
For Mychel Mendes, accountant and cryptocurrency expert, the implementation of Blockchain technology in Real Digital benefits the Central Bank more than the common user, increasing efficiency for the government and the financial system.
Blockchain and the ease of monitoring with currency
Blockchain is a secure, collaborative network that allows for immutable records of transactions.
While for conventional banks this system could mean security, transparency and traceability, for Real Digital the use of Blockchain implies even faster and more precise monitoring of all citizens' financial transactions.
According to IBM, Blockchain networks distribute data across multiple points, making attacks more difficult and simplifying transaction tracking, which could represent a high level of state financial control.
Magalhães highlights that, even in its pilot phase, Real Digital presents resources that give the Central Bank the power to create restrictions on how long money can be kept, define automatic taxation rules and even block resources.
This flexibility of control could easily be extended to other bodies such as the Federal Revenue Service and the Judiciary, expanding the government's reach over access to personal resources.
Risks of “financial cancellation” and consequences for individual freedom
For American economist Robert Wenzel, the development of digital currencies by Central Banks could set dangerous precedents.
When the Federal Reserve (Fed) announced the creation of its digital currency in 2020, Wenzel warned about the risk of a State to monitor and even prevent individual economic transactions, which he called “a nightmare for individual liberty.”
This type of control, he said, could have serious implications for privacy and financial freedom in the future.
Central Bank responds to criticism
The Central Bank states that the Real Digital pilot project is in the testing phase, with the purpose of receiving suggestions from developers to adjust the system as necessary.
However, Bacen admitted that some of the functionalities mentioned are actually viable within the Real Digital structure.
For Magellan, this centralization of financial control creates an imminent risk to the privacy and freedom of financial decision-making of Brazilians.
Although some of these functions are provided for in existing systems, such as Pix, Magalhães warns that Real Digital puts all citizens' financial keys in government hands, an unprecedented situation for any monetary system.
This would represent, according to him, a significant step towards total control over personal assets, unprecedented in the current financial system.
After all, is handing over so much power over personal finances to the government a step forward or a dangerous risk to citizens’ freedom? What do you think of this measure?
I am in favor of a single digital currency in Brazil and that everything be backed and traceable. I believe that this will reduce corruption in the country. In the way we are living, corruption continues to run wild regardless of political ideology. Blockchain, everything is audited and traceable. Who receives and delivers, including real estate and cars (furniture), all with a "serial number." What did they buy it with? And who do they sell it to? Currencies (digital real) too. End corruption quickly and many people will pay more taxes.
I already knew that the articles on this site were bad... But this one surpassed them. Pure fake news from someone who didn't even read the Drex proposal. Besides, the common real will not cease to exist, neither digitally nor physically. Drex will be the digital version of the real.
You will be able to have your money in your account in the form of Real or Drex.
Pure ignorance.
This is the end of freedom, there is no such thing as people working and the government taking care of people's rights.
This is very dangerous for our privacy. The government should take better care of the taxes we pay and spend them more cautiously, if the government does not even have control over public money. Now it wants to put a halter on the people and take care of the population's money. This is unacceptable and is the end of our total freedom.
Brazilians in power being Brazilians in power, we already have PIX which is very similar but is only volatile, without banknotes and in moments, this proposal, in addition to leaving us at the mercy of the government, will be at the mercy of one click of theirs to be financially frozen, so many things have already been created, transparency portal, purchases only by auction or bidding and overbilling has never been so high, even elections without auditing or recounting of votes, what improvement or security would this currency bring to us citizens, the USA uses banknotes and is the largest economy in the world, the government first has to stop robbing us by reducing taxes, lowering the prices of gasoline, IPVA and energy and income tax for those who earn up to 6 thousand, forget about this currency that does not exist, and enough of the robbery because in 2 years we will already be in the G20 of the economy.
Well, from my point of view, the government has too much power over the Brazilian population. It's not enough to have so many privileges, so much immunity, special jurisdiction, and now they want total control over my hard-earned money. It's not enough to have so many taxes, so many wrongdoings. What kind of country is this? How long will this farce continue? I feel like I'm in a circus where they give us bread as crumbs and in return, those in power, together with the criminals, feel free to do whatever they want to have more power and control over the population. How long will we wake up from this nightmare one day?