Brazil Ponders Potential Relaxation of Plans for Locally Held Stablecoins after Discussion
Brazil Tightens Regulation of Cryptocurrencies and Stablecoins
Brazil is moving towards a more regulated cryptocurrency landscape, with the Central Bank of Brazil (BCB) taking the lead in shaping the regulatory framework for stablecoins and other digital assets.
In a significant development, the Deputy Governor of the central bank, Renato Gomes, expressed concerns about cross-border stablecoin transfers, describing them as "worrisome" [Reuters reported]. The BCB is focusing on anti-money laundering, tax compliance, and transparency to ensure stable and long-term market growth for crypto payments.
The Brazilian Virtual Assets Law (BVAL), enacted in 2023 and currently being implemented, defines Virtual Asset Service Providers (VASPs) as legal entities regulated under Brazilian law. This law introduces licensing requirements for crypto businesses, now termed Digital Asset Service Providers (DASPs). To operate legally, providers must register and obtain authorization from the BCB [1].
The upcoming regulations will formalize licensing conditions, strengthen cybersecurity standards, and require clear consumer risk disclosures to protect users from fraud. These rules apply to entities facilitating crypto transactions, including those involving stablecoins [1].
One of the key questions being addressed is whether stablecoin transactions between self-custody wallets of residents and priced in reais should be classified as foreign exchange transactions. Currently, Brazilian law prohibits the use of foreign currencies for domestic payments, and this prohibition is being evaluated for stablecoins [1].
The issuer of the largest Brazilian Real stablecoin is based in Switzerland, limiting the central bank's oversight. However, the BCB launched a consultation on cryptocurrency, cross-border payments, and foreign exchange to address these issues [1].
The consultation proposed only allowing authorized VASPs to execute cross-border payments and blocking self-hosted wallet transactions. However, there are indications that the plans to restrict self-hosted wallet transactions may be relaxed [2].
The BCB is also evaluating whether the prohibition of using foreign currencies for domestic payments applies to stablecoins. Deputy Governor Gomes mentioned that capital flows become more volatile due to stablecoin transfers [3].
In the international regulatory context, Brazil’s approach aligns with a broader expectation that stablecoin and crypto service providers adhere to global standards like those from the Financial Action Task Force (FATF). The Central Bank’s regulatory framework is expected to include minimal AML/KYC standards compatible with international norms for cross-border crypto transactions [1][4].
The regulatory changes in Brazil are part of a broader trend, with several regions such as Europe, Hong Kong, and the United States now rolling out stablecoin legislation [5]. As the days when a stablecoin could move freely around the world without legal restrictions may be numbered, the industry is expected to adapt to the new regulatory landscape.
References: [1] Central Bank of Brazil: https://www.bcb.gov.br/ [2] Valor Econômico: https://www1.valor.com.br/ [3] Reuters: https://www.reuters.com/ [4] Financial Action Task Force: https://www.fatf-gafi.org/ [5] CoinDesk: https://www.coindesk.com/
- The Central Bank of Brazil (BCB) is focusing on legal regulations for stablecoins, with concerns raised about cross-border stablecoin transfers being classified as foreign exchange transactions.
- As part of the Brazilian Virtual Assets Law (BVAL), service providers handling crypto transactions, including stablecoin entities, must be authorized and comply with anti-money laundering (AML), tax compliance, and transparency standards.
- The technology sector, particularly the finance industry, is anticipated to adapt to the new stablecoin regulations in Brazil, aligning with global standards such as those set by the Financial Action Task Force (FATF).
