Brazil advances Bill 4308 banning algo stables like USDe and FrxUSD, requiring segregated reserves and 8-year jail terms for issuers

Brazil’s Congress is moving forward with legislation that would effectively ban algorithmic stablecoins in the country, impose full‑reserve requirements on all locally issued stablecoins, and create a new financial‑fraud crime carrying prison terms of up to eight years for non‑compliant issuers. The initiative, Bill 4,308/2024 (often referenced as Bill 4308), has been approved by the lower house Science, Technology and Innovation Committee and still must pass additional committees and the Senate before becoming law. The bill targets algorithmic and uncollateralized stablecoins—including examples such as Ethena’s USDe and Frax’s FRAX—by banning their issuance and trading in Brazil unless they are fully backed by segregated reserve assets. Any stablecoin issued in Brazil would need to be 100% reserve-backed, with clear segregation of those reserves and enhanced transparency requirements; issuing unbacked or under‑collateralized stablecoins would be defined as a specific financial‑fraud offense punishable by up to eight years in prison. For foreign stablecoins like USDT and USDC, the bill allows their continued use only through firms authorized to operate in Brazil, and obliges exchanges to ensure that foreign issuers comply with Brazilian reserve and disclosure standards or assume the associated risks themselves. The move is significant because stablecoins account for roughly 90% of Brazil’s crypto trading volume, making the country one of the largest stablecoin markets globally. Lawmakers are responding to global concerns about the systemic risks of unbacked or algorithmic designs—highlighted by the Terra/Luna collapse—by pushing a conservative model that treats stablecoins more like regulated e‑money, with strict backing and custody rules. If enacted, the bill would sharply curtail riskier stablecoin architectures in Brazil, reshape how exchanges list and support both local and foreign stablecoins, and could influence how other emerging markets set standards for stablecoin backing and issuer liability. "entities":["Bill 4,308/2024 (Bill 4308/2024)","Brazilian Congress","Brazilian Chamber of Deputies Science, Technology and Innovation Committee","Ethena","USDe","Frax","Frax USD (FRAX/FrxUSD)","Tether","USDT","Circle","USDC","Brazilian Federal Tax Authority"]}`'}

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