Brazil Proposes Ban on Algorithmic Stablecoin Issuance and Trading

KuCoinFlash

Release Time: 02/05/2026 13:46:04

Summary

Brazil's Senate Committee on Science, Technology, and Innovation passed a bill on February 5, 2026, to ban algorithmic stablecoin issuance and trading, impacting liquidity and crypto markets. The bill requires all stablecoins to be fully backed by reserves, with uncollateralized tokens labeled as financial fraud, carrying up to 8 years in prison. Foreign stablecoins like USDT and USDC must be offered by Brazil-authorized firms. Brazil’s tax authority reported stablecoins make up 90% of crypto trading volume. The bill now moves to other committees and the Senate for final approval. Rising regulatory scrutiny may affect risk-on assets in the short term.

BlockBeats news, on February 5, according to CoinDesk, the Brazilian Congress Science and Technology Innovation Committee passed a bill prohibiting the issuance or trading of algorithmic stablecoins such as USDe by Ethena and Frax. The new bill requires all stablecoins issued in Brazil to be fully backed by reserve assets. Issuing uncollateralized stablecoins in violation of the regulations will be considered financial fraud, with a maximum sentence of 8 years in prison.

For stablecoins issued abroad, such as USDT and USDC, they can only be provided by companies authorized to operate in Brazil, and trading platforms must ensure that foreign issuers comply with Brazilian regulatory standards. According to data from Brazil's tax authority, stablecoins currently account for 90% of the country's cryptocurrency trading volume. The bill still needs to be approved by multiple committees and reviewed by the Senate to officially become law.

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