Brazil Targets Illegal Bitcoin, Stablecoin Use Through New Proposals

Digital asset hotspot Brazil is trying to crack down on criminal use of crypto through separate legislative and regulatory proposals issued by the government and central bank this month. 

A rule proposed by the country’s central bank on Monday would make it easier to target illegal stablecoin use by creating authorization requirements for currency exchanges, including crypto trading platforms. The rule says that any purchase, sale or exchange of virtual assets pegged to fiat currency would be deemed a foreign exchange operation. 

“BCB Resolution 521 establishes rules for some activities of virtual asset service providers (VAPs), which are now treated as foreign exchange and international capital market operations,” the rule reads on the bank’s website. 

The central bank proposal comes after President Luiz Inácio Lula da Silva sent a bill to the country’s congress that would allow authorities to seize property—including “virtual assets”—during investigations and convert them into fiat currency. 

“In the case of seizure of foreign currency, bonds, securities, checks issued as payment orders, or any other instruments representing value or virtual assets, the judge will order their conversion into national currency,” the bill, which still needs to be approved by congress, reads. 

Stablecoin Concerns

Brazil’s central bank President Gabriel Galipolo has raised concerns about the difficulties of tracking stablecoin use. 

Galipolo in February said that crypto use “maintains some kind of opaque vision for taxation or for money laundering.”

Stablecoins are digital tokens pegged to non-volatile assets—usually U.S. dollars—that can be used to make quick transactions. 

Brazil, Latin America’s biggest economy, is the region’s biggest digital asset market, and has the largest number of crypto ETFs, including funds tracking Bitcoin, Ethereum, Solana and other tokens. 

A high-ranking official in the ruling administration earlier this year said that a potential strategic Bitcoin reserve would be “determinant for our prosperity.”