Brazil to ban algorithmic stablecoins, tighten oversight

Brazil plans to ban algorithmic stablecoins, require full reserve backing, and enforce strict penalties. Foreign stablecoins must be offered by licensed firms. The bill awaits further approvals.

Brazil is progressing with legislation to ban algorithmic stablecoins and require all stablecoins to be fully backed by segregated reserve assets. Bill 4.308/2024, recently approved by the Science, Technology, and Innovation Committee, targets stablecoins like Ethena’s USDe and Frax that maintain value through algorithms rather than collateral. The bill introduces strict transparency requirements and classifies the issuance of unbacked stablecoins as financial fraud, punishable by up to eight years in prison. Foreign stablecoins such as Tether’s USDT and Circle’s USDC could only be offered by licensed firms operating in Brazil. This move comes as stablecoins represent about 90% of Brazil’s crypto transaction volume, positioning the country as a key test case for global crypto regulation. The legislation still requires further approvals before becoming law.