The Central Bank of Brazil (BCB) has just issued a new regulatory proposal, aimed at banning cryptocurrency platforms from allowing the transfer of stablecoin to self-custody wallets. This is part of the Brazilian government's strategy to increase control and management of the rapidly growing cryptocurrency sector in the country.
Brazil applies new restrictions on stablecoin
The regulatory proposal, announced on November 29, primarily targets stablecoin. Accordingly, cryptocurrency exchanges in Brazil will no longer be allowed to support the transfer of stablecoin to users' self-custody wallets. Specifically, virtual asset service providers will be prohibited from transferring foreign currency-backed virtual assets to users' self-custody investment portfolios.
In addition, this proposal also adjusts the way cryptocurrencies are handled in current financial instruments such as foreign direct investment and international credit. Virtual asset service providers will need to comply with international financial regulations and report customer information to the Central Bank of Brazil.
However, the BCB also recognizes the potential benefits of virtual assets, such as improving efficiency in foreign exchange services and expanding investment options. However, the agency also warns about the risks, including investor protection, data security, and financial stability.
The Central Bank of Brazil emphasizes that the adoption of virtual assets must address many issues related to consumer protection, privacy, cybersecurity, prevention of illicit use, protection of market integrity, and ensuring macroeconomic financial stability.
The importance of regulation for the cryptocurrency market
The BCB believes that these measures will help clarify the legal framework for businesses handling international crypto payments and digital assets backed by foreign currency. This is an important move as Brazil's cryptocurrency market continues to grow rapidly.
According to data from Chainalysis, from July 2023 to June 2024, over $90 billion in digital assets were traded in Brazil. Stablecoin currently accounts for about 70% of cryptocurrency transactions transferred from domestic exchanges to international markets.
Fintech companies and exchanges in Brazil currently offer USD stablecoin as a value preservation tool, especially in international business-to-business transactions. However, analysts warn that if this proposal is passed, it could slow the development of the cryptocurrency industry in Brazil and Latin America.
Stablecoin has become an important platform in the cryptocurrency industry, with a market capitalization reaching a record $190 billion. Applying restrictions on stablecoin could have a significant impact on the development of the cryptocurrency market in Brazil.
Previously, a Brazilian congressman had also officially proposed a bill to establish a strategic Bitcoin reserve fund, called the National Strategic Bitcoin Reserve Fund (Reserva Estratégica Soberana de Bitcoins – RESBit), to diversify the national treasury.
=> Read more: Brazil introduces bill to establish a national Bitcoin reserve fund
