Brazil's Central Bank Prohibits Crypto and Stablecoin Settlement for Cross-Border Transactions

The Central Bank of Brazil has introduced a ban on the use of cryptocurrencies, including stablecoins, for settling international transactions. This prohibition, outlined in BCB Resolution No. 561, applies to electronic foreign exchange providers and takes effect on October 1, with a phased implementation schedule extending into 2027. According to the new rules, payments between providers and their foreign counterparts must be conducted through traditional foreign exchange transactions or non-resident real-denominated accounts in Brazil, effectively excluding cryptocurrencies from the process. This means that remittance companies can no longer convert customer funds into cryptocurrencies like USDT, USDC, or bitcoin for cross-border settlements. However, the regulation does not impact crypto trading, and investors can continue to buy, sell, and hold cryptocurrencies through authorized service providers. The change primarily affects companies that had incorporated stablecoin settlements into their cross-border payment services. Brazil's crypto market, which processes between $6 billion and $8 billion monthly, will need to adapt, with stablecoins accounting for approximately 90% of the volume. The resolution also imposes restrictions on who can operate as an eFX provider, limiting it to institutions authorized by the Central Bank, such as banks and certain payment institutions. Unauthorized firms must apply for authorization by May 31, 2027, and adhere to stricter client fund management and reporting requirements. Additionally, the new regulation expands the scope of eFX to include transfers related to financial and capital market investments, both domestically and internationally, with a transaction limit of $10,000. This regulatory move is part of a broader effort to define the role of cryptocurrencies in Brazil's financial landscape, drawing a distinction between their use as investments and their role in payment infrastructures.