Brazil bans stablecoin transfers to self-managed wallets

The Brazilian Central Bank (BCB) has issued a regulatory proposal to ban platforms that allow withdrawals from stablecoins to self-managed wallets.

The initiative is part of the country’s broader effort to regulate the rapidly growing cryptocurrency sector.

Brazil Aims to Regulate Cryptocurrency with New Stablecoin Regulations

The draft regulations, published on October 29, specifically target “Foreign currency-denominated tokens.” According to the proposal, cryptocurrency exchanges in Brazil will no longer be allowed to support the transfer of these stablecoins to self-custodial wallets.

“Virtual asset service providers are prohibited from transferring virtual assets denominated in foreign currencies to self-managed portfolios,” the proposal said. stated clearly.

Additionally, the proposal seeks to harmonize the treatment of cryptocurrencies and existing financial instruments such as foreign direct investment and external credit. Virtual asset service providers will have to comply with international financial regulations and report customer information to central banks.

BCB highlights the potential benefits of virtual assets, including increased efficiency in foreign exchange services and investment options. However, the agency also notes risks such as investor protection, cybersecurity and financial stability.

“The acceptance [tài sản ảo] also raises concerns, especially in cases connected to the traditional model, regarding aspects such as consumer and investor protection, security, and prevention of use for illegal purposes. , financial and market integrity, as well as maintaining fiscal and macroeconomic stability,” the regulator commented.

For these reasons, BCB believes that its measures will bring legal clarity to businesses that process international cryptocurrency payments and foreign currency-based digital assets.

This regulatory step comes as Brazil’s cryptocurrency market continues to grow rapidly. Over the past year, the Brazilian cryptocurrency market has grown strongly, with the country receiving over $90 billion in digital assets from July 2023 to June 2024, according to Chainalysis. Stablecoins dominate, accounting for 70% of cryptocurrency transactions moving from domestic to international exchanges.

Many fintech companies and exchanges in Brazil offer USD-backed stablecoins as a value preservation option, especially for business-to-business cross-border payments. As a result, market analysts warn that the Brazilian authorities’ move could hinder the sector’s progress in the Latin American country.

Notably, stablecoins have become a cornerstone in the cryptocurrency industry, with a market capitalization reaching a record $190 billion, according to TinTucBitcoin data.

The public consultation period for this proposal runs until February 28, 2025, allowing stakeholders to provide input. However, BCB retains the final say on whether these contributions will affect the final regulatory framework.

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