Crypto in Brazil

Brazil legalized cryptocurrency trading with Law No. 14,478, enacted on December 21, 2022, and effective June 20, 2023, establishing a comprehensive regulatory framework. The law designates the Central Bank of Brazil (BCB) as the primary regulator for virtual asset service providers (VASPs), while the Securities and Exchange Commission (CVM) oversees tokens classified as securities. CVM Resolution 175, effective October 2022, allows investment funds to invest in crypto assets, and CVM Instruction 626 (2022) sets rules for crypto exchange-traded funds (ETFs). The BCB is drafting specific regulations for VASPs, expected in 2024, covering licensing, governance, and anti-money laundering (AML) requirements. In 2023, the BCB issued Normative Instruction 243, mandating crypto exchanges to report transactions to the tax authority. Brazil does not recognize crypto as legal tender, but a bill proposing Bitcoin as legal tender was introduced in 2021 but stalled. The regulatory environment is evolving, with the BCB aiming to foster innovation while mitigating risks.

Brazil taxes cryptocurrency gains as capital gains under Provisional Measure No. 1,172/2023, effective January 1, 2024. Gains up to BRL 5 million are taxed at 15%, gains between BRL 5 million and BRL 10 million at 17.5%, and gains above BRL 10 million at 22.5%. Monthly sales below BRL 35,000 are exempt. Taxpayers must report transactions on the Annual Income Tax Return (DIRPF) and monthly via the Declaração de Débitos e Créditos Tributários Federais (DCTF) for gains exceeding BRL 35,000. Normative Instruction RFB No. 1,888/2019 requires exchanges to report user transactions to the Federal Revenue Service. Losses can be offset against future gains. Mining and staking rewards are taxable as income at progressive rates up to 27.5%. The tax authority has increased enforcement, cross-referencing exchange data with taxpayer filings.

Brazil leads Latin America in cryptocurrency adoption, with over 20 million users, approximately 9.3% of the population, according to a 2023 Chainalysis report. The country ranks 9th globally in the 2023 Global Crypto Adoption Index. Institutional adoption is growing: in 2023, Nubank, Brazil's largest digital bank, announced that 1 million customers hold crypto, and Itaú Unibanco launched a crypto custody service. The Brazilian Stock Exchange (B3) lists crypto ETFs, including Hashdex's Nasdaq Crypto Index ETF (HASH11), which has over BRL 1 billion in assets. Use cases include remittances, with crypto remittance volume reaching $2.5 billion in 2023, and DeFi, with Brazil ranking second in DeFi adoption in Latin America. The Central Bank's Digital Real (Drex) pilot, launched in 2023, aims to tokenize financial assets and improve cross-border payments. Retail adoption is driven by inflation hedging and access to global markets.