Brazil’s central bank has raised concerns about the rapid rise in the use of US dollar-backed stablecoins for cross-border money transfers, warning that the development undermines capital controls and increases capital flow volatility.

On Tuesday, Deputy Governor Renato Gomes stated that the growing popularity of stablecoins—digital assets pegged to fiat currencies such as the US dollar—challenges established processes that govern currency conversion and international transfers.

Stablecoins take hold in cross-border transactions

Brazilian crypto adoption has surged in the last two to three years. Central bank estimates show that stablecoins account for nearly 90% of crypto-linked financial flows in the country.

They are appealing because they operate as a mediator between local currency and dollars, allowing them to transfer or receive money across borders at a quick speed and low cost, without the delays and fees of traditional banking.

Stablecoins are frequently used for remittances, Gomes said. To illustrate just how accessible these assets have really become, there are now even ATMs out in parts of the US that let a user directly withdraw cash from select stablecoin wallets.

Bypassing traditional financial oversight

The central bank also highlighted that stablecoins present a means of circumventing Brazil’s regulations on foreign exchange and cross-border movement of funds.

Speaking at a conference on monetary policy organised by think tank OMFIF in London, Gomes stressed that “these digital currencies enable people to bypass the formal routes through which reals are exchanged for dollars”.

“You can obtain the stablecoins, and when you come into the United States or somewhere else, you can redeem the stablecoin and basically have a dollar account without all the normal regulations”, he noted.

For remittance, this circumvention is then being “heavily used”, he added. Thus, capital flight is increasingly challenging to track and more erratic, given that virtually anyone with access to a stablecoin wallet can transfer cash in and out of the country with little resistance or supervision.

Regulatory blind spots and the need for global cooperation

The challenges go beyond domestic oversight. Gomes also mentioned that several stablecoin issuers active in Brazil’s currency space are based overseas.

The main issuer of real-backed stablecoins, for example, is based in Switzerland, far from the regulatory jurisdiction of Brazil’s central bank.

This lack of direct control over foreign-based issuers creates a significant void in financial regulation. As Gomes pointed out, tackling the threats posed by stablecoins will necessitate strong international cooperation.

Because these assets are decentralised and cross-border, national regulators cannot adequately minimise the risks on their own.

“We don’t have access to these issuers,” Gomes added, highlighting the critical need for international regulations to bring stablecoin activity under tighter scrutiny.

A new challenge for financial stability

Brazil’s experience is part of a larger worldwide trend in which central banks and regulators are wrestling with how to respond to the rapid expansion of digital money.

While stablecoins have evident benefits, particularly in boosting financial access and lowering remittance costs, they also create new vulnerabilities.

Unchecked, their extensive use might undermine the effectiveness of national capital restrictions, complicate monetary policy implementation, and expose economies to unexpected shifts in cross-border fund flows.

As Brazil faces these issues, its central bank is pushing its counterparts throughout the world to adopt coordinated solutions.

The story of Brazil may provide an early peek into the difficult trade-offs that central banks must navigate as they transition to a more digital, decentralised financial system.

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According to a new YouGov/Economist poll, inflation and high prices continue to be a top concern among most American voters, with 25% citing it as the single most significant issue facing the country.

The findings highlight the ongoing discomfort among consumers, who are still feeling the effects of the previous inflation crisis, as well as the political weight that economic pressures continue to carry.

The polling data for President Donald Trump, who is once again in the spotlight due to his economic policies, is not positive.

In this regard, YouGov/Economist poll results suggest that, as of today, 22% of Democrats view inflation as a major concern, while 28% of Republicans consider it an urgent issue.

According to the poll, the second and third most important worries for Americans are jobs, the economy, and health care.

These results indicate that, despite a strong stock market and stable employment rates, price hikes on everyday products remain a major vulnerability for Donald Trump.

Tariffs resurface, along with price fears

This polling comes weeks after the Trump administration re-initiated bipartisan efforts to ramp up trade tariffs with the rest of the world, a sharp move that economists and the public alike fear will lead to another wave of inflation.

A new round of tariffs was announced last month by Trump, drawing economists’ caution that the burden would ultimately be on households.

Last week, those concerns were bolstered by Walmart, the country’s biggest retailer, indicating it could be driven to raise prices due to the new tariffs.

Trump responded on social media, stating Walmart was using tariffs as a “scapegoat” and that the corporation should “eat the tariffs,” although the comments were viewed by many as political.

The political risk of rising prices

The widespread public anxiety over inflation creates a serious political danger.

Tariffs are designed to raise the cost of imported products, which, when passed on to consumers, directly contributes to inflation.

Economists have long warned about the inflationary impacts of tariffs, and the public appears to comprehend the relationship.

Trump’s efforts to shift blame to corporations seem to be part of a larger strategy to manage political blowback from actions that could exacerbate the very issue that voters feel is most important.

Given that pricing stability is frequently cited as a key motivator of consumer confidence—and thus voter behaviour—the administration’s trade policy decisions have political ramifications in addition to economic ones.

With inflation at the forefront of public concern, any more price increases tied to policy decisions may exacerbate unhappiness and harm the Trump administration’s reputation among the population.

According to the YouGov/Economist poll, inflation is more than simply a persistent economic issue; it is the defining concern for a sizable percentage of the population.

As the government boosts tariffs and large merchants begin to warn of price rises, the conflict between economic policy and political messaging becomes more apparent.

Trump may continue to fight back against business reactions and public criticism, but data show that many Americans are already recognising the dots—and they are paying more attention to costs than ever before.

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The UK’s annual inflation rate rose to 3.5% in April, coming in above economists’ expectations and halting a recent trend of declining price growth, according to figures released Wednesday by the Office for National Statistics.

Analysts polled by Reuters had forecast a rise of 3.3% in the consumer price index (CPI).

The latest reading compares with 2.8% in February and 2.6% in March, which had supported expectations for a continued easing in inflationary pressures.

Core inflation — which strips out volatile components such as energy, food, alcohol, and tobacco — also moved higher, reaching 3.8% year-on-year in April, up from 3.4% in March.

What drove the increase in UK inflation

The ONS said the largest upward contributions to the monthly change in inflation came from housing and household services, transport, and recreation and culture.

In contrast, clothing and footwear made a notable downward contribution, partly offsetting overall price growth.

Economists attributed the rise in headline inflation to several factors, including a higher energy price cap, tax changes for domestic businesses introduced in April, seasonal adjustments tied to the Easter holidays, and unseasonably warm weather.

The sharp increases aligned with the implementation of a £26 billion ($34.8 billion) hike in employer payroll taxes and a nearly 7% rise in the minimum wage, both unveiled in the October budget.

Surveys indicated that a significant share of firms intended to pass on the added costs to consumers through price increases in an effort to safeguard their profit margins.

BOE may remain cautious

The Bank of England had already signaled that it expected a temporary pickup in inflation to around 3.7% in the third quarter, reflecting energy price pressures and increases in regulated prices such as water bills.

Despite that forecast, the central bank proceeded with a rate cut earlier this month, lowering its benchmark interest rate to 4.25%.

Officials at the BOE noted that any further easing in monetary policy would be “gradual and careful,” as the bank continues to aim for its 2% inflation target.

That path could be complicated by global developments, including the impact of U.S. trade tariffs on international demand and domestic growth.

Markets react to hotter print

Sterling strengthened following the release of the inflation data.

The British pound rose by about 0.4% immediately after the numbers were published and was up 0.5% against the US dollar, trading at approximately $1.346.

The inflation uptick comes just days after official data showed that the UK economy grew by 0.7% in the first quarter — a stronger-than-expected figure.

However, economists cautioned that the performance may not be sustained in the second quarter, as the earlier growth was likely driven by front-loaded activity ahead of tax changes and trade uncertainties.

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Shares of Chinese electric vehicle giant BYD surged to a record high in Hong Kong on renewed investor optimism, widening the premium over its Shenzhen-listed shares to an all-time high.

The stock jumped as much as 4.4% in Hong Kong, pushing its price to over 5% higher than its mainland counterpart, after adjusting for currency exchange, according to Bloomberg data.

The rally followed Citi lifting the stock’s price target on its HK stock to HK$727 from HK$688 and on Shenzhen shares to 669 yuan from 630 yuan.

The stock has also been buoyed by upbeat sentiment following Contemporary Amperex Technology Co.’s market debut, signalling growing confidence among foreign investors in BYD’s long-term prospects.

This performance stands out in a broader market where Hong Kong shares typically trade at a 33% discount compared to mainland stocks, as tracked by the Hang Seng Stock Connect China AH Premium Index.

Source: Bloomberg

BYD attracts premium in HK due to its appeal among global investors

Strategists at UBS AG noted that while the overall valuation gap between mainland and Hong Kong markets is expected to persist, select stocks like BYD and China Merchants Bank Co. are attracting a premium due to their perceived quality and appeal among global investors.

Better liquidity in offshore markets is further enhancing the attractiveness of BYD’s Hong Kong shares.

Citi cited a favourable export pattern for Chinese passenger vehicles in the first four months of 2025, which benefits BYD in particular.

Citi pointed to the growing momentum in plug-in hybrid exports and accelerating market share gains for BYD’s battery electric vehicles abroad.

Citi also assessed that BYD is best positioned among major automakers to withstand any potential price cuts in 2026, thanks to its economies of scale and diversified geographic sales mix.

BYD eclipses Tesla in future readiness

Further reinforcing its rise, BYD has overtaken Tesla in the global future readiness rankings published by the International Institute for Management Development (IMD).

The report measures a company’s capacity to anticipate and adapt to external changes.

IMD said Chinese dominance in the automotive sector is growing, with BYD, Geely, and Li Auto occupying three of the top four positions.

Earlier, BYD surpassed Tesla to become the world’s top EV seller.

In 2024, it reported $107 billion in revenue and delivered 4.27 million vehicles, far outpacing Tesla’s 1.79 million units and $97.7 billion in revenue, which marked its first annual sales decline.

BYD deepens its roots in Europe with Hungary expansion

BYD’s international ambitions continue to grow.

CEO Wang Chuanfu announced the establishment of a European centre in Hungary during a joint news conference with Hungarian Prime Minister Viktor Orban.

The new facility will create 2,000 jobs and serve as a hub for sales, after-sales services, testing, and the development of localised vehicle models.

Hungary, which has maintained close trade ties with China under Orban’s leadership, is already home to BYD’s European electric bus factory in Komarom.

A second plant for electric vehicle production is currently under construction, cementing BYD’s strategic position in the European market.

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