The Central Bank of Brazil proposes to ban the withdrawal of stablecoins to self-custody wallets to enhance capital flow and foreign exchange market control.
On November 29, the Central Bank of Brazil (BCB) announced a new regulatory proposal to tighten the management of domestic stablecoin trading activities. This move comes amid a significant increase in the number of users and transaction volumes of stablecoins in Brazil recently.
According to the public consultation notice issued by the BCB, the conversion of stablecoins, defined as 'tokens valued in foreign currency', among Brazilian residents will be restricted, except for cases permitted by Brazilian law to make payments in foreign currency.
This regulation means that users will not be able to withdraw stablecoins from centralized exchanges to self-custody wallets. The BCB stated that this policy aims to protect the integrity of international capital flows and adjust the financial system in accordance with the realities of digital assets.
The above proposal is part of the cryptocurrency regulation bill that Brazil passed in December 2022. The bill designates the BCB as the authority responsible for establishing and overseeing the rules for the cryptocurrency industry in the country.
The public consultation on the new proposal will last until February 28, 2025, allowing market participants to contribute their opinions. However, the BCB has the right to dismiss these opinions and proceed according to the original proposal.
Impact on the Brazilian cryptocurrency market
The BCB asserts that the proposed regulations aim to enhance legal certainty for businesses and individuals, while promoting competition and efficiency in the foreign exchange market.
Specifically, this regulation focuses on three core activities of digital asset service providers operating in the foreign exchange market: supporting payments and international remittances via cryptocurrencies; providing exchange or custody services for tokens denominated in Brazilian reais for non-residents; and managing transactions related to tokens pegged to foreign currencies.
Notably, centralized exchanges will need to obtain foreign exchange licenses to provide services related to stablecoins. This presents a considerable challenge for exchanges, forcing them to meet stricter legal requirements.
Additionally, cryptocurrency investments, including imports and exports, will have to comply with the same regulatory standards as traditional investments. International credits, foreign direct investments, and Brazilian capital invested abroad related to cryptocurrencies will also have to comply with current international capital regulations.
According to data from the Brazilian Federal Revenue Service (RFB), nearly 4.4 million Brazilians transferred $4.2 billion in cryptocurrency in September 2024. Stablecoins accounted for a significant share with 71.4% of the total transaction value, equivalent to about $3 billion. Tether USD (USDT) is the most traded stablecoin, with $2.77 billion circulating among Brazilian cryptocurrency investors.
