Market News

Brazil Implements New Legislation to Ban Ethena's USDe Amidst Algorithmic Stablecoin Concerns

Brazil has taken decisive steps to regulate the cryptocurrency market by targeting algorithmic stablecoins, particularly Ethena's USDe.

The recently approved Bill 4.308/2024 outlines a comprehensive framework for stablecoins and proposes a ban on those that lack physical collateral.

This move is largely a response to the global turmoil surrounding unbacked stablecoins, notably following the Terra collapse in 2022.

Under the proposed legislation, stablecoins must be supported by segregated reserve assets, promoting greater transparency and accountability within the market.

Issuing unbacked stablecoins is classified as a serious criminal offense, with penalties potentially reaching eight years in prison, thereby emphasizing the legal ramifications tied to financial fraud.

Additionally, foreign stablecoins will require proper authorization to operate within Brazil, tightening regulations on international entities.

Cryptocurrency exchanges are now on alert, tasked with ensuring compliance with both domestic and global regulatory standards to mitigate legal risks.

This legislative shift is particularly significant given that stablecoins account for approximately 90% of Brazil's cryptocurrency trading volume.

The bill, while approved by the initial congressional committee, still awaits further approval from additional committees and the Senate to become law.

This underscores a critical moment in Brazil’s evolving regulatory landscape for cryptocurrencies and may set a precedent for other nations grappling with similar issues.