Brazil moves to ban algorithmic stablecoins like Ethena’s USDe

Brazil is advancing legislation to prohibit algorithmic stablecoins, following concerns about systemic risk highlighted by failures like Terra. A congressional committee approved Bill 4.308/2024, which redefines cryptocurrency regulations and specifically targets stablecoins that rely on code rather than collateral to maintain their value, such as Ethena’s USDe and Frax. The bill mandates that all stablecoins issued in Brazil must be fully backed by segregated reserve assets, increases transparency requirements, and introduces criminal penalties – up to eight years in prison – for issuing unbacked stablecoins. For foreign stablecoins like Tether’s USDT and USDC, the bill requires authorization to operate in Brazil and adherence to similar regulatory standards, placing responsibility on exchanges if foreign issuers don't comply. Given that stablecoins account for 90% of crypto trading volume in Brazil, this legislation could significantly impact the market. The proposal still requires approval from additional committees before potentially becoming law.

(Source：CoinDesk)