Central Bank of Brazil Proposes Ban on Self-Custody of Stablecoins Amid Real’s Plunge

• Central Bank proposes ban on self-custody of stablecoins
• Real hits historic low against dollar
• Brazilian crypto community expresses concerns over new regulation

The Central Bank of Brazil (BCB) has presented a proposal that aims to prohibit the transfer of stablecoins to cryptocurrency wallets. self-custody , such as Ledger or MetaMask. This measure comes at a time when the Brazilian real (BRL) is reaching a historic low against the US dollar (USD), generating economic concerns in the country.

On November 29, the BCB launched a public consultation proposing the inclusion of virtual asset service providers (VASPs) in foreign exchange market regulations. The focus is on stablecoins pegged to foreign currencies, such as Tether (USDT), widely used in Brazil. According to the draft, “the virtual asset service provider would be prohibited from transferring virtual assets denominated in foreign currency to a self-custodial wallet.”

This initiative comes amid a significant devaluation of the real, which recently surpassed the R$6,00 mark to the dollar, reaching an all-time high. This decline is attributed, in part, to the market’s negative reaction to the government’s fiscal proposals, including the income tax reform.

The BCB justifies the proposal as a way to align cryptocurrency operations with traditional financial regulations, aiming to increase legal certainty and allow the development of new business models, in addition to improving market efficiency. The public consultation is open until February 28, 2025, allowing market participants to present their opinions.

The crypto community in Brazil has expressed significant concerns regarding the proposal. Legal experts argue that banning self-custody of stablecoins violates fundamental principles such as free enterprise and property rights. Furthermore, industry analysts warn that restricting self-custody could harm the country’s growing cryptocurrency market, where stablecoins account for a substantial portion of transactions.

With the real among the currencies that lost the most value in 2024, the BCB’s proposal adds a layer of complexity to Brazil’s economic and financial landscape. The coming weeks will be crucial in determining how this regulation will affect the cryptocurrency market and the Brazilian economy as a whole.