LONDON (Reuters) -The surge in popularity of U.S. dollar-backed stablecoins as a way of transferring money abroad is increasing the volatility of Brazilian capital flows, Brazil’s central bank deputy governor said on Tuesday.
Brazilians’ crypto asset usage has surged over the past two to three years, with around 90% of the flow linked to stablecoins – digital money pegged to leading currencies like the U.S. dollar – its central bank estimates.
Deputy Governor Renato Gomes said one of the “worrisome” issues was that they can be a way to bypass the normal checks and balances for converting Brazilian real into dollars and transferring it in and out the country.
“They offer a bypass instance,” Gomes said at a conference in London hosted by monetary policy think-tank OMFIF.
“You can get the stablecoins, and when you get to the United States or anywhere else, you can cash out the stablecoin and essentially use an account in dollars without all the usual regulation.”
It is a route being “heavily used” for remittances he added. One straightforward example is that some traditional ATMs in parts of the U.S. now allow dollars to be withdrawn from some stablecoin wallets.
“Capital flows become more volatile,” Gomes said, “essentially because almost anyone can use stablecoins to send money in and out of the country.”
There are regulatory issues too. The largest issuer of Brazilian real-backed stablecoins was based in Switzerland, for example, Gomes said.
“We don’t have reach on these issuers,” he said. “So in a sense, regulating the issuers of stablecoins is something that’s going to require a lot of international cooperation.”
(Reporting by Marc JonesEditing by Alexandra Hudson)
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