The Central Bank of Brazil (BCB) has recently proposed a regulatory measure that would prohibit centralized exchanges from allowing users to withdraw stablecoins to self-custodial wallets. This move is part of the crypto regulation bill that was approved in Brazil in December 2022, with the BCB being responsible for creating rules for the crypto industry in the country. The public consultation on this proposal will be open until Feb. 28, 2025, allowing market participants to share their opinions with the regulator, although the BCB ultimately holds the authority to make final decisions.
The proposed rules outlined by the BCB aim to enhance legal certainty for businesses and individuals operating in the crypto market while also fostering competition and efficiency in the foreign exchange sector. The regulation focuses on three core activities for virtual asset services providers, including facilitating international payments and transfers via crypto, providing exchange or custody services for tokens denominated in Brazilian reais for non-residents, and managing transactions involving tokens pegged to foreign currencies. The regulations also ensure that crypto investments will be subject to the same regulatory standards as traditional investments, with compliance required with existing international capital regulations for external credit, direct foreign investment, and Brazilian capital abroad involving crypto.
According to data from Brazil’s Internal Revenue Service (RFB) published in November, nearly 4.4 million Brazilians transferred $4.2 billion in crypto in September, with stablecoins making up a significant portion of these transactions. Tether USD (USDT) dominated the stablecoin market with $2.77 billion moved by Brazilian crypto investors, representing 71.4% of all the value transferred during the month. This highlights the growing importance of stablecoins in the Brazilian crypto market and the need for clear regulations to govern their use.
The BCB’s proposed regulations also require centralized exchanges to obtain a foreign exchange license in order to offer services related to stablecoins. This ensures that exchanges operating in Brazil comply with the necessary regulations and standards set by the central bank. By imposing these requirements, the BCB aims to create a more stable and secure environment for the crypto industry, while also protecting the integrity of international capital flows and adapting the financial system to the realities of digital assets.
The public consultation on the proposed regulations gives stakeholders in the crypto market the opportunity to voice their opinions and provide feedback to the BCB. While market participants can share their views with the regulator, the final decisions lie with the central bank. This process allows for transparency and accountability in shaping the regulatory framework for the crypto industry in Brazil, ensuring that the rules are in line with the needs of the market and the broader financial system.
Overall, the BCB’s regulatory proposal for stablecoins in Brazil is a significant step towards creating a more robust and well-regulated crypto market in the country. By setting clear guidelines for the use of stablecoins and other virtual assets, the central bank aims to protect investors, enhance legal certainty, and promote competition and efficiency in the foreign exchange market. With stablecoins playing a key role in the Brazilian crypto ecosystem, these regulations will help to ensure the long-term stability and growth of the industry.
