Brazil's Central Bank Prohibits the Use of Stablecoins and Cryptocurrencies for Cross-Border Payment Settlements

The Central Bank of Brazil has issued a ban on the use of stablecoins and other digital currencies for settling international transactions, effective October 1. This new rule, outlined in BCB Resolution No. 561, impacts electronic foreign exchange providers and updates the regulatory framework for digital international payments. The resolution prohibits payments between providers and their foreign counterparts from being settled using cryptocurrencies, instead requiring transactions to be conducted through traditional foreign exchange transactions or non-resident real-denominated accounts in Brazil. While this ban affects the back-end infrastructure used by regulated eFX firms for cross-border payments, it does not prohibit individual investors from buying, selling, or holding cryptocurrencies through authorized service providers. The central bank's decision targets companies that have incorporated stablecoin settlements into their cross-border payment flows, such as Wise and Braza Bank. Brazil's cryptocurrency market processes between $6 billion and $8 billion monthly, with stablecoins accounting for approximately 90% of the volume. The resolution also outlines stricter requirements for eFX providers, limiting their operations to BCB-authorized institutions and imposing new reporting and account segregation requirements. Additionally, it expands the scope of eFX to include transfers related to financial and capital market investments, with a cap of $10,000 per transaction. This regulatory move is part of a broader effort to define the role of cryptocurrencies in Brazil's financial market, distinguishing between their use as investment assets and their role in payment settlements.