In the past few months Banco Central do Brasil has made a series of regulatory changes and legislative proposals, with the combination significantly constraining the benefits of stablecoins for cross border payments. Momentum has accelerated in the past two weeks. The net effect is to make stablecoin transactions more costly and slower. Its moves could potentially curtail the circulation of Brazilian real stablecoins offshore, depending on the legislative outcome. The changes also aim to protect monetary sovereignty and preserve the integrity of the foreign exchange market.
Two weeks ago it took steps that impacted stablecoin liquidity, increasing the cost of stablecoin transactions from around 0.1% to as much as 1%. This was the result of a central bank notification to banks and funds preventing funds from acting as a liquidity provider for a known agent, because it deemed this to be intermediation of FX transactions. Funds are still allowed to participate in arbitrage via broker accounts.
The same week it proposed a fast tracked rulemaking in an effort to reduce fraud, which would delay by up to 24 hours stablecoin transfers to offshore destinations or self-hosted wallets when they reach $10,000 or more in a single transaction or in daily aggregate per client. Virtual asset service providers (VASPs) can implement processes to allow them to release funds faster. This particular proposal attracted significant pushback from industry, explored later.
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