The Central Bank of Brazil (BCB) has recently introduced a regulatory proposal that would restrict centralized exchanges from allowing users to withdraw stablecoins to self-custodial wallets. This move is part of the crypto regulation bill that was approved in Brazil in December 2022, giving the BCB the authority to create rules for the crypto industry in the country.
The public consultation period for this proposal will remain open until Feb. 28, 2025, allowing market participants to provide their feedback to the regulator. However, the BCB ultimately has the power to make decisions as outlined in the document, regardless of the inputs received.
The main goal of these proposed regulations is to enhance legal certainty for businesses and individuals while promoting competition and efficiency in the foreign exchange market. The rules outline three core activities for virtual asset service providers operating in the foreign exchange market: facilitating international payments and transfers via crypto, offering exchange or custody services for tokens denominated in Brazilian reais to non-residents, and managing transactions involving tokens pegged to foreign currencies.
Additionally, the regulations would subject crypto investments, both inbound and outbound, to the same regulatory standards as traditional investments. This means that external credit, direct foreign investment, and Brazilian capital abroad involving crypto must comply with existing international capital regulations.
Under the proposed regulations, centralized exchanges would be required to obtain a foreign exchange license in order to provide services related to stablecoins. This is aimed at ensuring that these exchanges operate within the boundaries of the law and maintain integrity in international capital flows.
According to data from Brazil’s Internal Revenue Service (RFB), nearly 4.4 million Brazilians transferred $4.2 billion in crypto in September alone. Stablecoins accounted for 71.4% of the total value transferred, with Tether USD (USDT) being the dominant choice among Brazilian crypto investors, with $2.77 billion transacted.
Overall, these proposed regulations aim to bring more transparency and clarity to the crypto industry in Brazil, while also ensuring that the market operates in a secure and compliant manner. Market participants have the opportunity to provide their feedback during the public consultation period, but ultimately, the BCB will have the final say in implementing these rules.