USDT Trading Reigns Supreme in Brazilian Crypto Ecosystem

• Brazil’s Revenue Department recently reported a significant USDT transaction surge in the country.
• IMF remains apprehensive about Stablecoin threats and warns against financial disruption.

Receita Federal do Brasil, Brazil’s Special Department of Federal Revenue, has reported a significant increase in the use of stablecoins, specifically Tether’s USDT. 

USDT Dominance in Brazilian Crypto Trading

According to their report, the trading volume of USDT in 2022 exceeded the total trading volume of all other cryptocurrencies combined. Stablecoins now constitute approximately 10% of the global crypto trading volume and are seen as a reliable refuge during periods of high volatility in the crypto market.

Receita Federal data reveals that the most commonly traded stablecoins in Brazil are USDT, USDC, and BRZ, with the latter being pegged to the Brazilian real. The regulatory body has been closely monitoring the growth in stablecoin usage since 2019 and has discovered some intriguing trends.

Based on their research, stablecoins, led by USDT, have outpaced Bitcoin in transaction volume. In 2023, 80% of reported crypto transactions in Brazil were linked to USDT, making it the most traded digital asset in the country over the past 10 months. This shift gained momentum in 2022 following the high-profile collapse of Terra (LUNA), driving investors toward assets like stablecoins that are less susceptible to extreme market volatility.

Notably, USDT’s trading volumes in Brazil during the observed period exceeded 271 billion Brazilian Reais (approximately $54 billion), nearly double the trading volume of Bitcoin, which stood at just over 151 billion Reais (around $30 billion). 

Globally, the 24-hour trading volumes for USDT and Bitcoin were $24.7 billion and $14.91 billion, respectively. While USDT maintains a higher average volume, it has never had a lead larger than around 50%, nor has it surpassed the combined trading volume of all digital assets.

IMF Sounds Alarm Bells

As USDT’s dominance in Brazil and beyond becomes increasingly pronounced, the International Monetary Fund (IMF) has expressed concerns about the broader implications of stablecoins on the global financial landscape. The IMF warns that stablecoins, particularly those denominated in hard currencies like the U.S. Dollar, have the potential to replace official currencies, exerting a significant impact on a country’s monetary and fiscal policies.

To address these concerns, the IMF has put forth a set of policy recommendations. Firstly, the IMF has advised that countries should maintain robust, trusted, and credible domestic institutions. IMF noted that transparent and coherent monetary policy frameworks are essential for effectively addressing challenges posed by crypto assets.

Additionally, the IMF stated that policymakers should avoid making crypto assets official currency or legal tender status. This measure, according to the IMF, would entail accepting these assets for tax payments, fines, and debt settlement.

Furthermore, the IMF stated that policymakers should incorporate crypto assets into existing regimes and rules for managing capital flows in order to ensure stability and minimize potential disruptions caused by capital flow volatility.

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