TL;DR
Brazil advances bill to ban algorithmic stablecoins like USDe for lacking real collateral.
It mandates full, segregated reserves and enhanced transparency for all domestic stablecoins.
The law sets prison sentences up to eight years for unbacked issuance.
A Brazilian congressional committee approved a bill that changes how the country oversees digital currencies linked to traditional money. The proposal seeks to ban assets like Ethena’s USDe and Frax, which maintain their value through computer code rather than concrete financial backing.
The report was presented to the Science, Technology, and Innovation Committee regarding Bill 4.308/2024. Brazilian lawmakers express concern about the risks posed by these systems without real support, especially after Terra’s collapse in 2022, which caused massive losses to investors.
Requirements of the New Regulatory Framework
The bill establishes that all stablecoins issued in Brazil must have complete segregated reserves. This means each digital currency must be fully backed by real assets in separate accounts. The regulation also tightens transparency requirements and creates a new criminal offense specifically for anyone who issues stablecoins without adequate backing.
People convicted of violating these rules would face sentences of up to eight years in prison. This marks an important shift: Brazilian authorities will treat these cases as serious financial fraud.
For foreign stablecoins like Tether’s USDT and USDC, the law imposes additional conditions. Only companies authorized in Brazil can offer these assets. Trading platforms must verify that foreign issuers comply with regulatory standards similar to Brazil’s. If they do not, the responsibility for managing risks falls on the exchange.
Data from Brazil’s tax authority shows that stablecoins generate 90% of cryptocurrency trading volume in the country. Because of this, regulating these assets holds considerable importance for the nation’s financial system.
The proposal still requires approval from two additional committees before moving to the Senate and becoming law.
