Brazilian Legislative Committee Advances Bill to Ban Algorithmic Stablecoins

Brazil Advances Legislation to Ban Algorithmic Stablecoins

The Brazilian House Committee on Science and Technology recently approved a significant bill report aimed at banning algorithmic stablecoins. These digital assets, such as USDe and Frax, maintain value through algorithmic mechanisms rather than real asset collateral.

Key Provisions of the New Regulation

Under the proposed law, all stablecoins issued within Brazil must be fully backed by segregated reserve assets. The bill also increases transparency requirements and classifies the issuance of uncollateralized stablecoins as a criminal offense, punishable by up to eight years in prison.

Regulation of Foreign Stablecoins

For foreign-issued stablecoins like USDT and USDC, the bill mandates that only companies licensed to operate in Brazil may offer such assets. Exchanges will also be responsible for ensuring foreign issuers comply with standards equivalent to Brazilian regulations or bear the risk themselves.

Next Steps for the Bill

The bill still needs to be reviewed and approved by the Committee on Finance and Taxation and the Committee on Constitution, Justice, and Citizenship before being submitted to the Senate for final approval.