Tether’s stablecoin USDT has experienced a considerable increase in adoption in Brazil, making up 80% of the nation’s cryptocurrency transactions so far this year. Data from Brazil’s revenue service agency shows that USDT stablecoin has experienced a considerable rise in adoption nationwide. Market observers attribute the rise to the continuous utilization of USDT in the pairs favored by Brazilians to execute crypto transactions.
Factors Contributing to High Adoption of USDT in Brazil
By mid-October, this year’s USDT transactions rose to $271B Brazilian reais (approximately $55B), nearly two times. Bitcoin’s (BTC’s) total transactions in the nation were $151B reais (roughly $30B).
Stablecoins refer to cryptocurrencies made to have a constant value, mainly pegged to fiat currencies’ value, for instance, the Brazilian natural and the United States dollar. Despite USDT transactions increasing in Brazil since 2021, they surpassed BTC’s volume for the first time in July last year.
This was at the peak of the crypto industry’s storm in 2022, during the fall of crypto lenders Voyager Capital and Three Arrows Capital. The government reported that last year, the crypto winter reduced the crypto transaction volume in the nation by almost 25%. It ended at $154.4B reais (approximately $31B).
The Brazilian tax agency uses a complex system that depends on network analysis and artificial intelligence (AI) to monitor citizens’ crypto-associated activities. A blog post revealed that it is capable of detecting dubious activity and tracking the location of persons dealing with cryptocurrencies. The popularity of USDT arises from the preference for stablecoins in transactions, given they are pegged to the US dollar.
Brazil Adopts AI to Track Crypto Transactions
The revenue agency also targets crypto investments held overseas by the nation’s citizens. On October 25, the local Congress ratified a law that considers cryptocurrencies as ‘financial assets’ for tax reasons in foreign investments.
Beginning in January next year, earnings abroad between 6,000 and 50,000 reais (nearly $ 10,000) will attract a tax rate of 15%. Beyond this threshold, a 22.5% tax rate will apply.
Since 2019, all crypto exchanges running in Brazil must divulge all user transactions to the government. Capital gains from sales surpassing 35000 reais (roughly 7000) monthly are subject to a 15-22.5% progressive tax bracket.
International crypto exchanges like Bitso, Coinbase, Crypto.com, and Binance are popular platforms alongside other competitive local players, including Foxbit, Mercado, and Bitcoin. The ease of access to these platforms explains the rise in USDT adoption, primarily the mode of executing transactions among trading pairs. Lastly, as the third largest crypto by market capitalization, USDT yields certainty and inflexibility, unlike other stablecoins struggling to regain and maintain their pegs.