KEY FACTS: Brazil's Central Bank has finalized three resolutions (519, 520, and 521), effective February 2, 2026, requiring all virtual asset service providers (SPSAVs) to obtain licenses and comply with banking-grade standards, including enhanced AML/KYC protocols and consumer protections; crucially, stablecoin transactions, accounting for roughly 90% of Brazil's crypto activity, are now classified as foreign exchange operations, mandating detailed reporting, identity verification for wallet transfers, and a $100,000 cap on dealings with unlicensed foreign entities, aiming to curb money laundering, ensure capital flow transparency in balance-of-payments data, and integrate digital assets into the regulated financial system while preserving self-custody rights.

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Source: Brazil

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Brazil's Central Bank Classifies Stablecoins as Foreign Exchange Operations

Brazil's central bank has unveiled a comprehensive regulatory framework for cryptocurrencies. The Banco Central do Brasil (BCB) announced the finalization of three key resolutions—519, 520, and 521 on Monday, effectively bringing virtual asset service providers under the same stringent oversight as traditional banking institutions. At the heart of these rules is a classification of transactions involving stablecoins to be treated as foreign exchange operations, subjecting them to rigorous reporting, documentation, and anti-money laundering (AML) requirements.

This development marks the culmination of months of intense public consultation and deliberation, reflecting Brazil's evolving stance on digital assets. Once viewed with cautious experimentation, cryptocurrencies are now being integrated into the nation's financial infrastructure with a firm hand on compliance and consumer protection. As the rules gear up for implementation in early 2026, industry insiders and policymakers alike are buzzing about the implications for innovation, market access, and the fight against illicit finance.

Brazil has long been a hotspot for cryptocurrency adoption in the region. With over 10 million users and transaction volumes rivaling those of more established markets, the country ranks second only to Argentina in Latin American crypto activity. However, this rapid growth has not been without its challenges. Reports of scams, money laundering schemes, and tax evasion have prompted regulators to act decisively.

The BCB's resolutions introduce the concept of Sociedades Prestadoras de Serviços de Ativos Virtuais (SPSAVs), a formal licensing category for crypto brokers, custodians, and intermediaries. These entities will be required to adhere to operational standards that mirror those in the traditional banking sector, including robust consumer protection measures, enhanced transparency protocols, and stringent AML/Know Your Customer (KYC) processes.

The framework, which was first proposed earlier this year, underwent extensive public feedback, incorporating insights from industry stakeholders, legal experts, and consumer advocacy groups.

Effective February 2, 2026, the rules will mandate that SPSAVs obtain explicit authorization from the central bank before commencing operations. This includes detailed reporting on capital-market activities and cross-border transactions, which must begin by May 4, 2026. Non-compliance could result in hefty fines, operational suspensions, or outright license revocations, sending a clear message that Brazil intends to treat crypto firms as integral players in its regulated financial ecosystem.

One of the new regulations is Resolution 521, which categorizes the purchase, sale, exchange, or transfer of fiat-pegged virtual assets—commonly known as stablecoins—as foreign exchange (FX) operations. Stablecoins like USDT (Tether) and USDC (Circle's USD Coin), which maintain a 1:1 peg to the U.S. dollar or other fiat currencies, have exploded in popularity in Brazil. They offer a hedge against the volatile Brazilian real and facilitate seamless cross-border payments in a country where traditional remittance services can be costly and cumbersome.

Under the new rules, any international transfer or payment using stablecoins will fall under the same scrutiny as conventional currency trades or remittances. Licensed FX institutions and SPSAVs will be permitted to handle these transactions, but only after fulfilling extensive documentation requirements and adhering to value caps. Notably, dealings with unlicensed foreign counterparts will be limited to $100,000 per transfer, a measure aimed at mitigating risks associated with unregulated offshore entities.

The regulations extend even further, capturing transfers between self-custodied wallets when facilitated by a service provider. In essence, if a crypto exchange or broker intermediates a move from a user's personal wallet to another, it must verify the wallet owner's identity and trace the asset's origin and destination. This provision plugs a significant loophole in previous oversight mechanisms, ensuring that even decentralized elements of the crypto space are not immune to regulatory gaze.

While self-custody itself remains permissible, allowing users to hold their private keys without intermediary involvement, these rules effectively close reporting gaps that could have been exploited for illicit purposes. This approach balances user autonomy with the need for systemic integrity, a delicate tightrope that regulators worldwide are still learning to walk.

Back in February 2025, BCB President Gabriel Galipolo highlighted a startling statistic during a congressional hearing: approximately 90% of cryptocurrency activity in Brazil revolves around stablecoins, predominantly for payment purposes. In a nation grappling with inflation concerns and a robust informal economy, stablecoins have become a go-to solution for everyday transactions, from freelance payments to e-commerce settlements.

Yet, this ubiquity has raised red flags. Galipolo warned that the unchecked proliferation of stablecoin use poses "significant regulatory and oversight challenges," particularly in combating money laundering, terrorist financing, and tax evasion. Scams targeting novice users have also surged, with reports of phishing attacks and fraudulent platforms siphoning millions from unsuspecting Brazilians.

The classification of stablecoin operations as FX activities will enable the BCB to integrate them into official balance-of-payments (BoP) statistics, providing policymakers with a clearer picture of capital flows. This is hoped to prevent regulatory arbitrage and promote greater efficiency and legal certainty. The move also aligns Brazil with global trends, echoing similar efforts by the European Union's MiCA framework and the U.S. Securities and Exchange Commission's ongoing stablecoin scrutiny.

Broader Implications: Efficiency, Certainty, and the Battle Against Illicit Finance

The BCB's overarching objective is multifaceted. On one hand, it seeks to curb fraud and illicit activity by imposing banking-grade standards on the crypto sector. Enhanced AML protocols, for instance, will require SPSAVs to monitor transactions in real-time, flagging suspicious patterns such as rapid layering or unusual volume spikes. Consumer protections will mandate clear disclosures on risks, fees, and asset backing, empowering users to make informed decisions.

On the other, the framework promises to inject legal clarity into a market long plagued by uncertainty. For legitimate operators, this could unlock new partnerships with traditional banks and streamline integration with Brazil's Pix instant payment system, which already processes billions in transactions annually.

From a macroeconomic perspective, better visibility into stablecoin flows could aid in stabilizing the real and informing monetary policy. Brazil's BoP data, often skewed by informal channels, will now capture a more accurate snapshot of digital remittances, a boon for economists tracking the $4 billion-plus annual inflow from abroad.

Brazil's bold step positions it as a leader in Latin American crypto regulation, contrasting with more fragmented approaches elsewhere. Neighboring countries like Mexico and Colombia are still hashing out their frameworks, while Argentina's crypto-friendly policies have drawn international capital but also scrutiny over enforcement.

As the February 2026 rollout approaches, market participants are urged to begin compliance preparations immediately. Webinars, workshops, and BCB guidance sessions are already in the works, signaling a collaborative rollout. For Brazil's 200 million-plus population, many of whom view digital assets as a pathway to financial inclusion, these rules could be the catalyst for a more mature, resilient crypto ecosystem.

Information Sources:

• Brazil Central Bank
• Cointelegraph

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