A Brazilian congressional committee is pushing forward with a bill to ban algorithmic stablecoins.

PANews reported on February 5th that, according to CoinDesk, the Brazilian Congress's Committee on Science, Technology and Innovation has approved a bill aimed at banning algorithmic stablecoins. The bill would prohibit the issuance or trading of stablecoins like Ethena's USDe and Frax, which maintain their value through algorithms rather than fully collateralized assets, and would require all stablecoins issued in Brazil to be fully backed by segregated reserve assets.

The bill also raises transparency requirements and criminalizes the issuance of uncollateralized stablecoins, with violators facing up to eight years in prison. For stablecoins issued outside Brazil (such as USDT and USDC), the new regulations require that only companies authorized to operate in Brazil can offer such assets, and exchanges are responsible for ensuring their issuers comply with regulatory standards similar to those in Brazil; otherwise, they must assume full responsibility for managing the associated risks. The bill still needs to be reviewed by the Brazilian Council for Finance and Taxation and the Council for Constitutional, Judicial and Citizen Affairs before being submitted to the Senate to become law.