Stablecoins and Brazil

Brazil has experienced record inflation and a constant devaluation of its currency in recent years, leading more people to use cryptocurrencies, in particular stablecoins, than ever before. According to Receita Federal, the Brazilian tax authority, local traders traded $11.4 billion worth of stablecoins between January and November 2021, almost tripling the amount transacted in 2020. Bitcoin was also traded by stablecoins last year for $10.8 billion.

Several crypto exchanges began noticing Brazilian stablecoin traders quadrupling in number as early as 2020. Stablecoin purchases have been attributed to rising inflation. Brazil’s inflation rate in 2021 was 10.06 percent, the highest since 2015. Stablecoins were also bought by some Brazilians to protect themselves from the steady decline of the real against the U.S. dollar, which led to the real reaching $0.18 this month from $0.25 in January 2020. Stablecoins are offering a form of diversification, so you’re not solely exposed solely to one market. 

When Brazilians acquire foreign currency, they must pay taxes ranging from 1.1% to 6.38%. The tax does not apply to stablecoins and is probably the reason for the boom. Locals are prohibited from saving U.S. dollars in local bank accounts by the Brazilian Central Bank. A new exchange rate framework was approved by the monetary authority in December 2021, but it hasn’t yet been implemented.

Between January and November 2021, Brazilians acquired $9.7 billion worth of tether (USDT) according to Receita Federal. USDC, DAI, and TrueUSD (TUSD) were among the other stablecoins bought for $1.6 billion, $12.9 million, and $5.6 million respectively.

Brazilian stock exchange, B3, has nearly 5 million individual accounts, making it a mature market. Locals have, however, gained interest in stablecoins due to falling rates. As the Brazilian economy’s prime rate dropped, fixed income-investment returns plummeted. 

Brazil’s crypto exchanges have risen as interest rates for traditional assets have fallen. According to a written statement by Mercado Bitcoin, the largest crypto exchange in Mexico reached 3.2 million customers in 2021 and doubled its customer base compared to 2020. It is likely that emerging economies who become under distress through whatever means will likely start to see an influx and increase in “crypto” usage, whether it be stablecoins or bitcoins.