Brazil suggests limiting transactions of stablecoins to self-hosted wallets, and imposing further restrictions on cryptocurrency foreign exchange operations.
The Banco Central do Brasil, the country's central bank, has published a consultation regarding cryptocurrency, cross border payments, and foreign exchange (FX). The consultation, which is attracting professional interest due to its potential impact on the cryptocurrency industry, proposes several significant changes.
One of the key proposals is the ban on the transfer of foreign currency stablecoins to domestic self-hosted wallets. This restriction, which has attracted attention from the cryptocurrency community, is intended to keep tabs on cross border payments. If money can go to self-hosted wallets, it can be transferred abroad without any reporting, a practice the central bank aims to curb.
The consultation also proposes that only virtual asset service providers (VASPs) authorized to deal in FX can conduct cryptocurrency transactions for cross border payments and FX purposes. As of now, the Banco Central do Brasil has not yet authorized specific VASPs to conduct such transactions because the regulatory framework and licensing process are still being finalized and expected to begin in 2025 or 2026.
The upcoming regulation will impose strict requirements such as a minimum capital of R$15 million, annual audits, exclusive physical offices, and strong AML/KYC controls. Currently, crypto companies operate without a specific BC license under general tax authority guidance.
Another notable proposal is the restriction on the use of foreign currency stablecoins for domestic payments. This move is aimed at maintaining control over the country's monetary system and preventing potential financial instability.
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The news of these proposed restrictions has sparked a heated debate within the cryptocurrency community. While some argue that these measures are necessary to maintain financial stability and combat money laundering, others believe that they could stifle innovation and growth in the industry.
As the Banco Central do Brasil moves forward with its plans, it will be interesting to see how the cryptocurrency community responds and how the regulatory landscape evolves. Stay tuned for more updates on this developing story.
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