Brazil’s recent move to propose a ban on stablecoin transfers to self-custodial wallets could trigger a stronger shift towards decentralization, according to industry leaders. The Banco Central do Brasil (BCB) announced on November 29 its intention to prevent transactions involving stablecoins like Tether’s USDT from being moved to self-custodial wallets, such as MetaMask and Trezor.
This potential ban emerges as Brazilian citizens increasingly turn to US dollar-pegged stablecoins to shield themselves from the depreciating national currency. With public consultations on this regulation set to conclude in February next year, various industry experts are weighing in on its probable effects.
Carol Souza, co-founder of Area Bitcoin, suggests that the regulation is aimed at curbing transactions that occur outside Brazil’s regulated crypto exchanges. Since 2019, Brazilian exchanges have enforced Know Your Customer (KYC) requirements, though peer-to-peer (P2P) transactions still operate without such constraints. She anticipates that regulatory measures against P2P transactions might take effect by 2025, reflecting a governmental stance to sustain demand for their national currency amidst concerns of its value erosion.
Despite the proposed restrictions, many doubt the feasibility of enforcing such a ban effectively. Lucien Bourdon, a Bitcoin analyst at Trezor, remarks that while governments can regulate centralized exchanges, controlling P2P transactions and decentralized platforms remains a formidable challenge. The proposed ban could complicate access to cryptocurrency for newcomers while pushing existing users to embrace decentralized or P2P platforms.
Souza concurs, noting that the BCB lacks the capability to stop individuals from conducting P2P transactions through personal wallets or developing new stablecoin varieties, especially as innovations occur on Bitcoin layer 2 solutions.
Looking at parallel cases in countries like Nigeria and China, Bourdon observes that users tend to gravitate towards decentralized options when faced with restrictions on centralized exchanges. In China, for example, prohibitions led users to explore platforms like Uniswap, while similar actions in Nigeria prompted a shift to P2P exchanges.
Tether CEO Paolo Ardoino emphasizes that the proposed restrictions pose significant operational challenges and could inadvertently disadvantage Brazilian consumers due to the prevalent acceptance of stablecoins. He underscores Tether’s commitment to engage with Brazilian authorities to devise regulations that support innovation and safeguard consumers.
The situation in Brazil reflects broader global trends, illustrating how regulatory landscapes influence the adoption and evolution of cryptocurrency technologies.
