Crypto News – Brazil to Regulate Stablecoin Transactions Amid Currency Devaluation
Crypto News – On November 29, 2024, Banco Central do Brasil (BCB), Brazil’s central bank, unveiled a proposal aimed at banning stablecoin withdrawals to self-custodial wallets like MetaMask. This proposal is part of a broader draft regulation intended to tighten oversight of virtual asset transactions, particularly those denominated in foreign currencies. The initiative will be subject to public consultation until February 28, 2025.
The draft states, “The provider of virtual asset services is prohibited from transferring virtual assets denominated in foreign currency to a self-custodial portfolio.” This restriction is aimed at controlling the movement of stablecoins like Tether’s USDt in the face of Brazil’s economic challenges.
Brazil’s Growing Push for Stablecoin Regulation
The proposed regulation is part of Brazil’s broader strategy to regulate the foreign exchange market and restrict capital movements abroad. The central bank’s consultation document expands on existing resolutions that govern virtual asset service providers (VASPs) and now seeks to include crypto payments, sales, custody, and transactions involving foreign currencies. VASPs would be required to submit detailed information to BCB, including client identification and transfer details.
Self-Custody and Its Implications
Self-custodial wallets allow users to hold their crypto assets without the need for a centralized intermediary, meaning they don’t require Know Your Customer (KYC) information to conduct transactions. This lack of oversight has raised concerns among regulators, who see self-custody as a potential loophole in controlling crypto movements.
The Real’s Decline and Stablecoin Adoption
The proposal to limit stablecoin transactions comes as the Brazilian real (BRL) has experienced a dramatic devaluation against the U.S. dollar. Since January 1, 2024, the BRL has lost over 23% of its value, with the dollar reaching a historic high of 6.09 reais on November 29. Many in the Brazilian crypto community have turned to stablecoins like USDt to hedge against inflation, making the country one of the largest global markets for stablecoin transactions.
In 2023, Brazil accounted for 59.8% of its total crypto market volume in stablecoin transactions, placing it as the second-largest market globally, just behind Argentina. As the real continues to struggle, the Brazilian government’s push for stricter crypto regulations is intensifying.
This evolving regulatory landscape may change how stablecoins are used in Brazil, potentially impacting the broader cryptocurrency ecosystem.
Disclaimer: This website’s content is for informational purposes only and does not constitute financial advice, with all cryptocurrency purchases carrying inherent risks.
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