Brazil moves to ban algorithmic stablecoins like Ethena’s USDe

Policy Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email Brazil moves to ban algorithmic stablecoins like Ethena’s USDe New legislation requires all stablecoins to be fully backed by reserve assets and introduces penalties for issuing unbacked stablecoins. By Francisco Rodrigues | Edited by Oliver Knight Feb 5, 2026, 11:58 a.m. Make us preferred on Google (Rafaela Biazi/Unsplash/Modified by CoinDesk) What to know : Brazil is advancing toward banning algorithmic stablecoins with the approval of Bill 4.308/2024, which prohibits unbacked stablecoins like Ethena’s USDe and Frax. New legislation requires all stablecoins to be fully backed by reserve assets and introduces penalties for issuing unbacked stablecoins. Foreign stablecoins like Tether's USDT and USDC must comply with Brazilian standards, placing risk management responsibilities on exchanges; stablecoins account for 90% of the country's crypto volumes. Brazil is moving closer to banning algorithmic stablecoins, as a congressional committee approved a bill that redefines how the country handles cryptocurrencies pegged to fiat currencies. The Science, Technology, and Innovation Committee passed a report on Bill 4.308/2024 that prohibits the issuance or trading of stablecoins like Ethena’s USDe and frax, which aim to maintain their value through code rather than collateral. STORY CONTINUES BELOW Don't miss another story. Subscribe to the State of Crypto Newsletter today . See all newsletters Sign me up By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy . The legislation follows global concerns about the systemic risk posed by unbacked models, particularly after high-profile failures such as Terra’s collapse in 2022 . The bill mandates that segregated reserve assets fully back all stablecoins issued in Brazil. It also increases transparency requirements and introduces a new criminal offense for issuing unbacked stablecoins. Those found guilty of doing so could face up to eight years in prison, in a shift toward treating such practices as financial fraud. For stablecoins issued abroad, including Tether’s USDT and USDC, the bill imposes new rules. These assets can only be offered by firms authorized to operate in Brazil, while exchanges must confirm that foreign issuers follow regulatory standards similar to Brazil’s. If not, the exchange becomes responsible for managing potential risks. Stablecoins, according to data from Brazil’s tax authority, d rive 90% of cryptocurrency volumes in the country. The proposal still needs approval from Brazil’s Finance and Taxation and Constitution, Justice, and Citizenship committees before moving to the Senate and potentially becoming law. Brazil Stablecoins Algorithmic stablecoin