IMF: Brazil stablecoin flows outpace traditional capital movements

The International Monetary Fund has called for tighter oversight of Brazil's stablecoin market, saying cross-border crypto flows now outpace traditional capital movements and stablecoin purchases are two to three times more sensitive to global financial shocks.

The assessment, part of the IMF's Financial System Stability Assessment for Brazil, said the country's crypto market has grown since 2017 and dollar-pegged stablecoins now dominate activity. The fund said the growing links between crypto and the traditional financial system require stronger regulation.

Cross-border crypto transactions have increased faster than conventional capital flows, the IMF said. Stablecoin purchases react more sharply during periods of global market stress than portfolio investment or foreign direct investment. That sensitivity could make capital movements through crypto markets more volatile during external financial shocks, the fund said.

BCB Governor Gabriel Galípolo has said stablecoins account for about 90% of the country's reported crypto flows. Regulators are monitoring tax and money laundering risks, according to his earlier comments.

Brazil's central bank has already introduced measures. In April, the BCB published Resolution BCB No. 561, which amended rules for electronic foreign exchange providers. The regulation requires payments between regulated eFX providers and foreign counterparties to be completed through foreign exchange transactions or movements in non-resident Brazilian real accounts. It prohibits using virtual assets to settle those supervised cross-border payments. The measure does not ban crypto trading or stablecoin transfers more broadly, the BCB said.