Gabriel Galipolo, the president of Brazil’s central bank, recently addressed a Bank for International Settlements event in Mexico City, where he emphasized the country’s increasing adoption of cryptocurrency.
In recent years, Brazil has experienced a substantial increase in crypto transactions, with stablecoins accounting for approximately 90% of the activity. In contrast to their more volatile counterparts, these digital assets are increasingly being utilized for cross-border transactions and commonplace expenditures, as they are linked to stable values such as the U.S. dollar.
Galipolo, however, expressed apprehension regarding the difficulties associated with governing the rapid adoption of stablecoins, despite the positive growth. Complicating regulatory endeavors is the absence of transparency in numerous transactions, particularly those that pertain to taxes and money laundering. Regulators are encountering increasing challenges in enforcing financial supervision as a result of the increasing number of these transactions in international and retail markets.
Galipolo identified Brazil’s Drex initiative as a potential remedy to these challenges. Drex is structured to facilitate credit through collateralized assets, despite its frequent classification as a central bank digital currency. The project’s objective is to reduce borrowing costs and enhance access to secured financing, which have been historically challenging in Brazil. Drex will improve the efficacy of the lending market and expedite wholesale interbank transactions by implementing distributed ledger technology.
Galipolo also emphasized the increasing effectiveness of Pix, Brazil‘s real-time payment system. He proposed that Pix’s programmability could enable it to integrate with global immediate payment networks, thereby enhancing cross-border transactions and affirming Brazil’s status as a leader in digital payment infrastructure..
Furthermore, the Brazilian central bank’s proposal to prohibit stablecoin withdrawals to self-custody wallets is still subject to public consultation until February 2025, which adds to the apprehensions regarding regulatory oversight of the expanding crypto market.
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