IMF Warns Brazil's Stablecoin Boom Risks Faster Shock Transmission

Businesses are using dollar-pegged tokens to manage currency risk and make cross-border transfers easier. Retail users are turning to them as a hedge against local currency swings. Brazil's Pix instant payment system has helped, the IMF said. Millions of users already comfortable with digital payments face a smaller learning curve moving to crypto wallets and stablecoins.

The IMF described Brazil's crypto market as "large and fast-growing" and increasingly connected to the traditional financial system. It said the central bank has taken important steps to control the growing market. Gaps remain around customer asset protection, stablecoin issuance and anti-money laundering and counter-terrorist financing rules.

The Banco Central do Brasil has already started tightening its rules. In April, Resolution BCB No. 561 restricted electronic foreign exchange providers from using digital assets for certain international payments and transfers. Cross-border transactions must instead use standard foreign exchange channels or non-resident Brazilian real accounts. The move suggests Brazil is not looking to ban stablecoins outright, the IMF said. Regulators are trying to keep growing crypto activity within the formal financial system.

If stablecoin flows continue outpacing traditional capital flows, global market shocks could reach Brazil's financial system much faster than under the current framework, the IMF warned.