Crypto executives are confident that enforcing a ban on self-custodial stablecoins in Brazil will not be easy, with many examples proving that further decentralization is inevitable.
A potential decision by Brazil to ban transfers of stablecoins to self-custodial wallets would only trigger a greater move toward decentralization, industry executives say.
The Central Bank of Brazil (BCB), on November 29, officially proposed to ban transactions of stablecoins, such as Tether's USDt, to self-custody wallets like MetaMask or Trezor.
USDT
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The use of stablecoins has been growing in Brazil as citizens have sought to protect themselves against the devaluation of the Brazilian real by purchasing stablecoins backed by the US dollar.
With Brazil's central bank expected to conclude public consultations on the potential ban in February next year, several executives weighed in on its potential impact on the local market.
How likely is it that the ban will be passed?
The potential restrictions on stablecoins by the BCB aim to prevent stablecoin transactions from taking place outside of Brazilian trading platforms, Carol Souza, co-founder of the Área Bitcoin school, told Cointelegraph.
Cryptocurrency trading platforms in Brazil have been enforcing KYC measures since 2019, Souza noted, referring to the fact that peer-to-peer (P2P) transactions remain free of such restrictions.
Brazil has been a pioneer in regulation, imposing strict KYC rules and creating Pix — a system introduced in response to the growing popularity of Bitcoin, she said.
Souza suggested that the BCB’s proposal will likely become a reality in 2025, as the central bank appears to be preparing for regulations that would prevent individuals from conducting P2P transactions with stablecoins. She stated:
“If that is the direction the Central Bank takes in the public consultation, it is likely to be regulated as proposed. Another demonstration of how governments use bans to ensure that demand for their melting fiat currencies does not diminish.”
The ban would be difficult to enforce
While it is difficult to say whether Brazil will eventually implement the BCB’s proposed stablecoin restrictions, such proposals tend to face a lot of debate before implementation, Lucien Bourdon, Bitcoin analyst at Trezor, told Cointelegraph.
Brazil’s potential ban on self-custodial stablecoins would be difficult to enforce, Bourdon suggested, stating:
“Governments can regulate centralized exchanges, but P2P transactions and decentralized platforms are much harder to control, meaning a ban would likely only affect part of the ecosystem.”
On the other hand, restrictions in Brazil could potentially change common ways of accessing cryptocurrencies and make it harder for beginners to get started, potentially slowing adoption, Bourdon noted.
Even with a possible slowdown in adoption, existing users will find ways to transact cryptocurrencies freely, the executive suggested, stating:
“If approved, we expect users to migrate to decentralized platforms or P2P solutions.”
Carol Souza of Área Bitcoin echoed Bourdon’s remarks, emphasizing that the BCB cannot prevent people from carrying out P2P transactions through their own wallets or even creating new forms of stablecoins.
“This is especially relevant now that stablecoins are being created on Bitcoin’s layer 2 via Taproot Assets on Lightning and other layer 2 solutions like USDT on the Liquid network,” he added.
P2P migration seen in countries with similar bans
Brazilian authorities are not alone in trying to limit P2P cryptocurrency transactions, as other countries such as Nigeria and China have attempted to restrict crypto activities.
Referring to regulatory developments and their outcomes in countries such as Nigeria and China, Trezor’s Lucien Bourdon highlighted a pattern of cryptocurrency users moving to decentralized solutions when other options are limited.
“In China, the ban on centralized exchanges has pushed users towards decentralized platforms like Uniswap,” said Trezor’s Bourdon.
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“In Nigeria, where banks cannot facilitate cryptocurrency transactions, people have turned to peer-to-peer platforms and decentralized exchanges to trade and access cryptocurrencies,” he added.
Tether is committed to collaborating with Brazil
Tether CEO Paolo Ardoino told Cointelegraph that Brazil’s proposed restrictions on stablecoins could present significant practical challenges and could unintentionally harm Brazilian consumers, given the widespread adoption of stablecoins domestically and globally.
He mentioned that Brazil is one of the most active markets for USDt in Latin America, reflecting strong demand from users who value the stability of USDt in a dynamic economic environment.
Brazil, Tether, Stablecoin, Self-Custody, Politics
The Brazilian real (BRL) has hit record lows against the US dollar. Source: TradingView
“Tether is committed to working collaboratively with Brazilian authorities as part of its ongoing regulatory development work to find a balance that promotes innovation while ensuring robust consumer protections,” Ardoino said, adding:
“We are confident that a thoughtful regulatory approach can support Brazil’s leadership in the digital asset space and meet the needs of its economy and population.”
Fonte: Cointelegraph Brasil - 26.12.2024
Report credits: Helen Parts
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