90% of Cryptocurrencies Used in Brazil are Stablecoins

The Brazilian cryptocurrency market continues to show high numbers. When compared to other countries in Latin America, Brazil ranks highly, according to Gabriel Galipolo, the president of the Central Bank of Brazil. Approximately 90% of crypto-asset use in the country is linked to stablecoins.

This emphasises the importance of digital currencies in the national market. This index is directly linked to the Brazilian preference for assets that maintain greater stability in value, whether for trading, value reservation or payment purposes.

Why are stablecoins so important?

Stablecoins in Brazil are not news to those who keep up with changes in payment methods and national market demands. Galipolo himself emphasized at an event held by the International Payments Bank that the large-scale adoption of digital assets raises issues about supervision, taxation and preventing financial wrongdoing.

Because they are linked to the value of fiduciary currencies, like the US dollar, or other reserve assets, stablecoins have less volatility, making them more attractive, especially for those wishing to trade or send international remittances swiftly.

The growing volume of transactions with stablecoins is reflected in data disclosed by Chainalysis. Between July 2022 and June 2023, cryptocurrency users in Brazil moved approximately 90 billion dollars in crypto-assets, placing Brazil second in all of Latin America.

Out of this amount, more than 59% corresponds to transactions in stablecoins, while the remainder is divided between Bitcoin, Ethereum and other altcoins. This shows Brazilian investors’ strong affinity for more stable tokens, particularly in periods of economic uncertainty.

Another important factor is the adoption of these currencies by companies seeking less expensive and more efficient payment solutions. In 2024, for instance, e-commerce giant Mercado Livre announced the launch of its own stablecoin, the Meli Dollar, reinforcing the idea that major companies see value in offering such tools to expand financial inclusion and facilitate transactions.

Several initiatives enter the market with the proposition of offering more stable versions of tokens, tied to fiduciary currencies or even commodities. This strategy in a pre-launch of cryptocurrencies tends to attract those who wish to explore opportunities but aim to reduce the typical volatility of assets such as Bitcoin and Ethereum.

The popularity of stablecoins has also raised questions about regulation. Although the Central Bank has already set guidelines for the operation and oversight of fintechs and other payment institutions, the rapid pace of the crypto sector, coupled with a lack of specific regulations, demands that authorities consistently update their norms.

Discussions around taxation and prevention of money laundering are recurrent, as despite being traceable in blockchain, stablecoin transactions can still be targeted in illicit schemes. Lastly, the rapid adoption of these tokens is gaining attention not only from the government but also within the entire financial industry.

New partnerships, projects, and stablecoin payment solutions are expected to emerge in the following months, fueling even more the daily use of these assets. The initiative named “Drex”, for example, is gaining relevance, even though the Central Bank itself points out that it is not a conventional CBDC, but a project infrastructure capable of improving access to credit services.

Galipolo’s proposal involves using distributed ledger technology to effect interbank settlements more effectively and safely, which potentially can facilitate commercial transactions, encourage the digitalization of payments, and reduce the operational costs of the financial system.

On 14 October 2024, the Central Bank announced it was testing Drex in integrations with tokenization and DeFi (decentralized finance). This aims to improve settlement functions and allow a larger portion of the population to access the same guarantees and security processes currently offered in interbank operations.

The Drex will replace the Reserve Transfer System, which is being called “STR 2.0”. However, there are still technical details to be developed before the system can fully operate. While stablecoins are private initiatives, Drex remains under the scope of a solution managed by the Central Bank, something that could provide more security for financial institutions seeking a regulated environment.

This, on the other hand, raises questions about interoperability with other networks, as part of the issue is allowing Drex to communicate with broader digital systems and wallets without sacrificing the proposed security and efficiency. According to official data from the Central Bank of Brazil, thousands of companies are registered to operate in the digital payments segment, and many are exploring blockchain solutions.