Unbacked Stablecoins Face Ban in Brazil as New Bill Moves Forward

TLDR: Bill 4.308/2024 bans unbacked stablecoins like Ethena’s USDe and Frax in Brazil. Domestic stablecoins must maintain full reserves and report backing transparently. Exchanges offering USDT and USDC must verify foreign issuers meet Brazilian standards. Stablecoins now drive 90% of Brazil’s crypto volume, reaching $6–8B monthly flows. Brazil stablecoin ban advances as Congress approves Bill 4.308/2024, mandating full reserve backing for stablecoins. Foreign digital currencies like USDT and USDC must comply, while unbacked models face criminal penalties. Brazil Approves Bill to Restrict Algorithmic Stablecoins According to a report by CoinDesk, Brazil’s Science, Technology, and Innovation Committee has approved Bill 4.308/2024. The legislation targets the issuance and circulation of unbacked stablecoins such as Ethena’s USDe and Frax. All stablecoins issued domestically must be fully backed by segregated reserve assets. Issuers are required to maintain transparency in reporting the reserves supporting these digital currencies, ensuring full traceability. Brazil moves closer to banning algorithmic stablecoins as a congressional committee approved Bill 4,308/2024, requiring all stablecoins to be fully backed by segregated reserves and prohibiting unbacked models such as Ethena’s USDe and Frax. The bill introduces criminal penalties… — Wu Blockchain (@WuBlockchain) February 5, 2026 The bill classified it as a financial offense with penalties of up to eight years for issuing unbacked stablecoins. This measure establishes accountability and protects the integrity of Brazil’s financial system. Domestic exchanges are tasked with monitoring compliance for all local stablecoin issuers. They must ensure that backing requirements are continuously met, preventing any uncollateralized tokens from entering circulation. These rules are aligned with global concerns over the systemic risks posed by unbacked stablecoins, such as the Terra failure in 2022. Brazil aims to mitigate...