Brazil plans to ban stablecoin transfers to self-hosted wallets as real depreciates

The Central Bank of Brazil has issued a proposal on November 29th to prohibit virtual asset service providers from transferring foreign currency-denominated virtual assets to self-custodial wallets. This proposal is part of a draft, and the public can participate in the consultation until February 28th, 2025. The aim is to strengthen the regulation of the foreign exchange market and revise the 2022 resolution on virtual asset service providers. The Central Bank of Brazil proposes to expand the scope of the foreign exchange market, including crypto payments, sales, custody, and foreign currency trading. Virtual asset service providers need to provide the Central Bank with information such as customer verification and transfer amounts. Self-custodial wallets allow users to access funds without providing personal information, providing full asset ownership. Although regulators can restrict their use, they cannot completely prohibit them. The Brazilian real has depreciated against the US dollar, having lost at least 23% since the beginning of the year. Many members of the crypto community have linked Brazil's restrictions on stablecoin trading to the depreciation of the real. Brazil is the second-largest stablecoin market globally, with stablecoin trading accounting for 59.8% of its crypto market last year.