Regulation and Innovation: Brazil's Stablecoin Reform Ignites Discussion

Brazilian Central Bank Recognizes Stablecoins as Foreign Currency Transactions

The Central Bank of Brazil has officially designated stablecoin activities as foreign currency transactions, implementing a comprehensive set of regulations that will be enforced starting February 2026. Announced through Resolutions 519, 520, and 521, this initiative seeks to subject stablecoins to the same anti-money laundering (AML) and counter-terrorism financing (CTF) standards as conventional banks, making Brazil one of the first major economies to regulate digital assets as foreign exchange instruments.

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According to the new framework, all stablecoin transactions linked to fiat currencies—including overseas payments, card purchases, and international transfers—must now adhere to Brazil’s established foreign exchange laws.

This encompasses compulsory identity checks for users moving funds to self-managed wallets, comprehensive transaction documentation, and capital requirements for asset service providers (VASPs) ranging from R$10.8 million to R$37.2 million, based on their assessed risk level . The central bank stressed that these measures are intended to deter illegal financial activities, with Governor Gabriel Galipolo highlighting that stablecoins represent 90% of Brazil’s crypto transactions and have been used to bypass traditional regulatory scrutiny .

The new rules have sparked immediate backlash from privacy supporters, who claim the regulations amount to “complete surveillance” of crypto participants. Analyst Felipe Demartini pointed out that exchanges will need to keep a centralized record of user identities, transaction logs, and wallet information, potentially exposing users to cyber threats and political exploitation

. Detractors also caution that the regulatory burden could hinder innovation by forcing smaller crypto businesses out of the industry due to rising compliance expenses and increased operational demands .

The central bank has justified its stance as essential for aligning the crypto market with broader financial stability objectives. Gilneu Vivan, Director of Regulation, stated that the new policies will “limit opportunities for scams, fraud, and the misuse of virtual asset platforms for money laundering,” referencing the R$1.7 trillion in crypto transactions processed in Brazil in 2024

. The timing of these regulations also aligns with Brazil’s upcoming launch of Drex, its blockchain-powered central bank digital currency (CBDC), planned for 2026. Some analysts believe the crackdown on stablecoins could help pave the way for Drex by reducing dependence on unregulated digital assets .

On the global stage, Brazil’s regulatory approach mirrors a broader movement toward harmonized oversight. Comparable policies are being rolled out in the U.S. and U.K., where stablecoin regulations are designed to balance technological progress with consumer safety. For example, the Bank of England has introduced a £20,000 cap on individual stablecoin holdings, citing concerns over financial stability

. In contrast, Brazil’s decision to treat stablecoins as foreign currency transactions introduces a unique regulatory dimension, which could shape how other countries manage cross-border digital asset movements .

With the February 2026 deadline drawing near, Brazilian crypto companies are entering a crucial phase of regulatory adjustment. While the new rules provide much-needed clarity for a rapidly expanding sector, they also highlight the ongoing tension between regulatory oversight and the decentralized nature of blockchain. For now, Brazil’s central bank remains committed to its dual objectives: promoting innovation while protecting the stability of the national financial system

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