BREAKING NEWS 🚨
Brazil advances bill to ban algorithmic stablecoins
Brazil is moving closer to restricting algorithmic stablecoins after a congressional committee approved Bill 4.308/2024, which would ban the issuance and trading of unbacked stablecoins such as Ethena’s USDe and Frax.
The proposal requires all stablecoins issued domestically to be fully backed by segregated reserve assets and introduces stricter transparency standards. It also establishes a new criminal offense for issuing unbacked stablecoins, with penalties of up to eight years in prison, marking a shift toward treating such activity as financial fraud.
Foreign-issued stablecoins including Tether’s USDT and USDC would face additional rules. Only firms authorized to operate in Brazil could offer them, and exchanges would be responsible for ensuring overseas issuers meet regulatory standards equivalent to Brazil’s. If not, the exchanges would bear the risk management burden.
The push reflects global concerns over systemic risks tied to uncollateralized stablecoin models, especially after the 2022 collapse of Terra. Stablecoins account for about 90% of Brazil’s total crypto trading volume, according to tax authority data.
The bill must still clear additional committees before moving to the Senate and potentially becoming law.
