BRAZIL Law and Practice Contributed by: Fabio Cendão, Heitor Maia, Eduardo Faria and Gabriel Lobato, Faria, Cendão & Maia Advogados (FCM Law)
6.2.2 Stablecoin Regulation Fiat-backed stablecoins are regulated in Brazil with- in a specific framework for virtual assets, and not merely as an extension of the traditional payments regime. BCB Resolution No 520 treats these assets as fiat-referenced virtual assets, subject to the regime applicable to VASPs. This regime provides for spe- cific requirements relating to offering, selection, list- ing, user information, risk analysis, proof of reserves, quality of reserve assets, audited financial statements, assessment of the issuer and safeguards in the event of discontinuity. At the same time, the regulation creates points of connection with the financial, payments and foreign exchange systems. BCB Resolution No 521 includes certain transactions involving virtual assets in the for- eign exchange market, such as the purchase, sale or exchange of fiat-referenced virtual assets, payments or international transfers with virtual assets, and trans - fers related to the international use of a card or other electronic means of payment. The Brazilian model can therefore be described as hybrid. Fiat stablecoins are regulated, first, as virtual assets within the VASP regime; however, when used in payments, foreign exchange, international transfers or structures connected to the traditional financial system, they may also attract rules specific to those regimes. The regulatory analysis therefore depends on the economic function performed by the stablecoin and the way in which it is integrated into the payment, settlement or value transfer chain. 6.2.3 Backing Assets Backing and Reserves for Fiat-Backed Stablecoins The reserve framework for fiat-backed stablecoins is centred on the quality, composition and verifiability of the assets supporting the peg. In general terms, reserve assets may consist of the relevant fiat cur- rency and government bonds issued by the same government that issues that currency. This approach favours liquid, low-risk assets capable of preserving parity, while excluding structures based on crypto- assets, private assets, synthetic instruments or purely algorithmic stabilisation mechanisms.
For a VASP to offer or list a stablecoin, its assessment must consider the quality of the stabilisation mecha- nism, the issuer’s policies for selecting and maintain- ing reserves, the existence of proof of reserves, relia- ble information on the proper constitution of reserves, audited financial statements and the risk profile of the issuer, custodians, reserve assets and relevant juris- diction. The regulation does not generally require reserves to be held in Brazil. Even so, the location of the issuer and custodians, applicable safeguards and user rights in the event of issuer discontinuity are relevant factors, including when assessing the possibility of claiming reserve assets in Brazil or abroad. The regulation also does not establish an automatic right for holders to receive interest or income gen- erated by reserve assets. If the structure provides for automatic remuneration, economic participation in reserves or a promise of yield, further regulatory analysis will be required, as the product may resemble an investment offering, security, irregular fundraising arrangement or other regulated product, depending on its economic function and how it is offered to the market. 6.2.4 Special Considerations Brazilian regulation does not yet establish a specific category of systemically relevant stablecoins, nor a dedicated recovery or resolution regime for issuers of these assets. Even so, the Central Bank regime provides relevant safeguards for fiat-referenced sta- blecoins, including requirements relating to the qual- ity and composition of reserves, proof of reserves, assessment of the stabilisation mechanism, user information, issuer governance, risks of custodians and safeguards in the event of discontinuity. In practice, stablecoins with greater scale, broad adoption, integration with payments or use in inter- national transfers tend to attract greater regulatory scrutiny, particularly with respect to maintenance of the peg, transparency of reserves, operational conti- nuity and user protection.
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