Executives from the Central Bank of Brazil have given positive statements regarding the change of a proposal that would ban Brazilians from withdrawing stablecoins to self-custody wallets.

In statements given during a tokenization event in Rio de Janeiro, Eduardo Nogueira Liberato, head of the central bank’s division of the Prudential and Exchange Regulation Department, explained that the final rule might be very different from the proposed in the public consultation.

Read more: Brazil Groups Stablecoins With Foreign Currency in New Regulatory Draft

He stated:

As we realize that service providers can monitor the quality of self-custody clients, we see room for flexibility. The important thing is to hold the institution accountable for getting to know the client who uses self-custody.

Furthermore, he stated that the proposal, revealed as part of a public consultation, was different from others that presented rulesets that were almost ready to be implemented. “In the case of this consultation on virtual assets in the foreign exchange market, it was more exploratory, to have a more general view of market participants,” he explained.

The statements come as industry actors harshly criticized the effects of this rule, which would affect Brazilian citizens using stablecoins as a dollar proxy without any middlemen involved. Binance and other exchanges have rejected this rule as it is, stressing that this measure could be substituted with periodic reports of transactions made by users, avoiding a total ban.

This, combined with a partnership with companies that analyze blockchain data, would allow the bank to determine the holdings of each user without having to prohibit stablecoin withdrawals.

A total ban on stablecoin withdrawals could eventually criminalize the use of decentralized finance platforms in Brazil, as these leverage stablecoins to generate yield benefits, an unintended consequence of a measure seeking to treat stablecoins as foreign currency.

Read more: Crypto Exchanges Oppose Brazil’s Stablecoin Self-Custody Ban

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