The International Monetary Fund said in its Financial System Stability Assessment released this month that Brazil’s crypto-based cross-border flows have been rising steadily since 2017 and now exceed traditional capital flows. According to the report, most of those flows are driven by stablecoins, with companies and retail users turning to them for efficiency and tax-related reasons. The IMF said stablecoin activity is correlated with international and domestic investment indicators including the S&P 500, the VIX, and Bitcoin prices, while also being affected by exchange rates, interest rates, policy uncertainty, and changes in tax policy. The report added that Brazil’s central bank has already taken steps to regulate the virtual asset service provider, or VASP, sector, but gaps remain in areas such as legal protections for customers and segregation of custodied assets. On anti-money laundering and counter-terrorist financing, the IMF said international standards including the travel rule still need to be fully implemented. It also noted links between Brazil’s crypto system and the traditional financial system, and said regulators need stronger cooperation at home and abroad as well as better reporting mechanisms. Brazil’s Congress is preparing to review Bill 4308/2024 to define the status of stablecoins.
The International Monetary Fund said in its Financial System Stability Assessment released this month that Brazil’s crypto-based cross-border flows have grown continuously since 2017, with the scale now exceeding traditional capital flows.
Stablecoins account for most of the activity
The report said most of those flows are driven by stablecoins. Companies and retail users are using stablecoins for efficiency and tax-related reasons.
Flows track market and policy variables
According to the IMF, stablecoin flows are linked to international and local investment indicators including the S&P 500, the VIX, and Bitcoin prices. They are also affected by exchange rates, interest rates, policy uncertainty, and shifts in tax policy.
Regulatory gaps remain
The IMF said Brazil’s central bank has taken steps to regulate the virtual asset service provider, or VASP, sector. Even so, the report said shortcomings remain in customer legal protections and the segregation of custodied assets. On anti-money laundering and counter-terrorist financing, or AML/CFT, the IMF said international standards including the travel rule still need to be fully implemented.
Congress prepares to review stablecoin bill
The report also said Brazil’s crypto system has ties to the traditional financial system. Regulators need to work with domestic and overseas counterparts and build stronger reporting mechanisms. Brazil’s Congress is preparing to review Bill 4308/2024 to regulate the status of stablecoins.
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