The International Monetary Fund has cautioned that Brazil’s cryptocurrency market, led by US dollar-pegged stablecoins, has expanded rapidly since 2017. Cross-border crypto flows have increased faster than conventional capital movements and display greater sensitivity to global shocks.

Stablecoin purchases are two to three times more responsive to global disturbances than traditional portfolio investment or foreign direct investment. The Fund described the domestic crypto-asset market as large, fast-growing and increasingly linked to the traditional financial system.

Banco Central do Brasil has introduced regulation for crypto-asset service providers. Remaining gaps include customer asset protection, rules governing stablecoin issuance and compliance with anti-money-laundering and counter-terrorist-financing standards.

In April the central bank issued Resolution BCB No. 561, which revises requirements for electronic foreign-exchange providers and bars the use of digital assets for certain international payment and transfer services. Under the revised framework, payments and receipts between such providers and foreign counterparties must occur through foreign-exchange transactions or movements in non-resident Brazilian real accounts.