New Proposal in Brazil Could Restrict Stablecoin Transfers to Private Wallets

Brazil's Central Bank (BCB) has unveiled a draft proposal aiming to restrict the withdrawal of foreign currency-backed stablecoins to self-custody wallets.

This move is part of broader efforts to regulate the nation’s expanding cryptocurrency market.

The proposed framework would prohibit crypto exchanges from enabling transfers of stablecoins tied to foreign currencies to private wallets. The BCB views this as aligning digital assets with existing financial instruments, such as foreign investments and credit, while ensuring compliance with global financial regulations. Service providers would also be required to report client data to the central bank.

While the BCB acknowledges the potential of virtual assets to enhance foreign exchange services and investments, it has flagged risks involving investor protection, cybersecurity, and macroeconomic stability. The regulatory body argues that its measures will provide legal clarity for businesses dealing with international crypto transactions and foreign currency-backed assets.

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Brazil’s crypto market has seen substantial growth, with over $90 billion in digital assets transacted between July 2023 and June 2024, according to Chainalysis. Stablecoins, particularly USD-backed ones, dominate this market, often serving as a stable value medium for cross-border B2B payments. Critics warn that the proposed restrictions could stifle the industry’s progress in the region.

Stablecoins, now a fundamental part of the crypto ecosystem, have reached a global market cap of $190 billion. The public consultation for Brazil’s proposed rules will remain open until February 28, 2025, after which the BCB will decide on final regulations based on stakeholder feedback.

Kosta Gushterov