Latin American regulators are increasingly focused on the location of dollar reserves backing stablecoins. While US authorities prioritize issuer specifications and auditing, the regional challenge involves managing access to a foreign currency that local governments do not control.
Data shows significant growth in stablecoin adoption across the region. In Brazil, institutional stablecoin volume surged from 5% of local crypto flows in 2024 to 84% in 2025. Argentina currently holds the highest share of dollarized crypto market volume globally.
Legislative activity is rising, with the Mexican Senate currently debating a bill to regulate peso-pegged stablecoins. Meanwhile, Brazil has had specific rules for the sector in force since February, and Argentina operates under its PSAV regulatory regime.
The debate centers on whether to mandate that a portion of reserves be held in local banks, similar to a proposal made by Kenya's Treasury in July. Kenya suggested requiring issuers to hold at least 30% of customer funds in domestic banks to address dollar scarcity.
Experts warn that forcing local reserves could fragment liquidity and push users toward unregulated platforms. The alternative approach involves the coexistence of locally-reserved and offshore-reserved instruments, allowing users to choose where their assets are held.
