Brazil’s central bank, Banco Central do Brasil, is taking notice of the significant surge in cryptocurrency adoption within the country and is planning to respond with stricter regulations on digital assets.
According to data from the central bank, imports of cryptocurrencies in Brazil increased by a substantial 44.2% during the period from January to August 2023 compared to the same period in 2022, totaling approximately 35.9 billion Brazilian reals, equivalent to $7.4 billion.
Roberto Campos Neto, the governor of Banco Central do Brasil, highlighted these rising “cryptocurrency imports” during his address to the parliamentary Finance and Taxation Commission on September 27. He specifically pointed out the growing popularity of stablecoins, noting that they are increasingly being used for payments rather than as investment vehicles.
In response to these trends, the central bank is planning to tighten regulations and extend its supervision over cryptocurrency platforms. Campos Neto also expressed concerns about potential issues related to cryptocurrencies, such as tax evasion and illicit activities, emphasizing the need for regulatory measures:
“We understand that a lot is connected to tax evasion or linked to illicit activities.”
In June 2023, Brazil had granted the central bank a primary role in the regulation of cryptocurrencies. However, it’s important to note that projects involving tokens classified as securities will still be under the jurisdiction of the Comissão de Valores Mobiliários, which is the Brazilian equivalent of the United States Securities and Exchange Commission.
Additionally, the Brazilian central bank is actively developing its own digital currency, known as Drex. In August, it unveiled the brand and logo for this central bank digital currency. Notably, there has been controversy surrounding Drex, with reports suggesting that Brazilian blockchain developer Pedro Magalhães discovered functions within the Drex code that could potentially allow a central authority to freeze funds or reduce account balances.
The surge in cryptocurrency adoption in Brazil is prompting the central bank to take action to ensure that the market operates within a regulated framework, addressing concerns about tax evasion and illicit activities. These regulatory efforts also align with the central bank’s ongoing development of its own digital currency, Drex, as it seeks to navigate the evolving landscape of digital finance.