Brazil Regulates Stablecoin Use by eFX Providers

The Brazilian central bank has taken a significant step towards regulating the country's cryptocurrency market with the introduction of Resolution BCB 561.

The resolution specifically targets eFX providers, such as Wise, Nomad, and NuBank, which are barred from using stablecoins or virtual assets for the offshore settlement of regulated international transfers.

However, individuals and institutions buying, holding, or sending USDT abroad remain unaffected by this rule. Additionally, peer-to-peer crypto transfers and Virtual Asset Service Providers (VASPs) operating under separate rules via BCB 521 are also exempt from this regulation.

The central bank's primary concern is the use of stablecoins in cross-border flows, which account for a significant 90% of Brazil's reported crypto-linked transactions. This has raised concerns about tax compliance, anti-money laundering (AML) gaps, and the lack of local oversight over foreign-issued stablecoins.

The resolution may have broader implications for the cryptocurrency market, as it sets the stage for potential tougher restrictions or bans on foreign-issued stablecoins like USDT and USDC in pending bill PL 4308/2024. This aligns with global trends towards regulating cryptocurrencies and stablecoins, particularly in the context of cross-border payments.