Brazil to Set Crypto Regulations by 2024, Establishing Itself as a Pioneer in Blockchain Technology
Brazil has emerged as a thriving hub for the cryptocurrency industry, with a favorable regulatory framework in place. Prior to 2023, the sector operated under the Brazilian Civil Code, but everything changed with the implementation of the Brazilian Virtual Assets Law in 2022.
This legislation, also known as the Cryptoassets Act, provides a legal framework for virtual assets in Brazil. It was published as law no. 14,478 in December 2022. The law was a significant milestone, paving the way for further sector-focused regulations.
President Lula Da Silva played a crucial role in this regulatory innovation by signing a decree that designated the central bank as the primary supervisor of the crypto economy. Since then, the central bank has been actively monitoring and regulating virtual asset providers in the country. The objective is to prevent cryptocurrency-related scams.
The Crypto Assets Act, which came into force on June 20, 2023, outlines guidelines for providing services with virtual assets and regulates the activities of service providers in this field. It defines virtual assets as digital representations of value that can be electronically traded and used for payments or investments. The act requires prior authorization for the provision of services, establishes virtual asset service provider (VASP) services, and introduces new criminal responsibilities for crypto asset operations.
In 2014 and 2017, the Central Bank of Brazil expressed concerns about the operational risks and discouraged the use of cryptocurrencies. However, in 2019, the Special Department of Federal Revenue of Brazil published a document on cryptocurrency taxes, signaling a shift in the country’s stance.
In December 2022, Brazil introduced a licensing procedure for virtual asset service providers with the aim of legalizing cryptocurrency as a payment method. This move brought Brazil’s crypto industry under a more comprehensive regulatory framework.
The Central Bank of Brazil emerged as the primary authority overseeing the regulation and supervision of virtual asset services, with a focus on market stability and risk mitigation.
In terms of taxation policies, the Brazilian Senate approved new income-tax regulations that require citizens to pay up to 15% on earnings from cryptocurrencies held on international exchanges. Bill 4173/2023, an amendment to the taxation law, was adopted in November 2023. According to this bill, income from crypto assets exceeding BRL 6,000 would be subject to a 15% tax rate, expected to take effect on January 1, 2024.
While Bitcoin is not recognized as legal tender in Brazil, the country has legalized cryptocurrency as a payment method nationwide. This has contributed to the increased adoption of digital currencies. Brazil is widely regarded as a progressive space for cryptocurrency, offering a well-regulated and secure environment for crypto trading.