Data from Brazil’s federal tax authority indicate that crypto transactions reached 227bn reais ($42.8bn) during the first half of this year. Brazil is considering new taxation regulations for cross-border transactions involving cryptocurrencies, including stablecoins, as reported by Reuters. This initiative follows the central bank’s recent classification of these transactions as foreign-exchange operations, aiming to integrate them into Brazil’s financial transaction tax (IOF).
### Potential Tax Changes Under Review
Currently, transactions involving cryptocurrencies are not subject to the IOF levy; however, investors must pay income tax on capital gains exceeding a certain monthly threshold from these digital assets. A source with knowledge of the situation mentioned that the Finance Ministry is evaluating how the IOF might apply to specific international transfers involving cryptocurrencies and stablecoins. The Finance Ministry has yet to issue an official statement regarding these potential tax developments.
### Addressing Regulatory Gaps
The intention behind the proposed tax changes is to close existing regulatory loopholes. This could also lead to increased public revenue, especially as Brazil faces increased scrutiny over its fiscal discipline. According to Reuters, Brazil’s cryptocurrency market has witnessed remarkable growth, largely fueled by stablecoins, which are backed by assets like the US dollar and typically show lower price volatility compared to other cryptocurrencies.
### Significant Growth in Crypto Transactions
Data from Brazil’s federal tax authority shows that crypto transactions reached 227bn reais ($42.8bn) in the first half of this year, representing a 20% increase compared to the same timeframe last year. Notably, approximately two-thirds of this activity involved USD Tether (USDT), while Bitcoin constituted about 11% of the total transaction volume. The central bank’s new regulatory framework supports this potential tax revision, emphasizing that stablecoins are mainly used as an economical way to maintain dollar balances.
### Concerns Over Stablecoin Usage
Officials have raised concerns that stablecoins are primarily being utilized for payment purposes instead of investment, which could lead to new opportunities for money laundering as regulations evolve. Starting in February, the central bank will classify any purchase, sale, or exchange of stablecoins as a foreign-exchange operation. These regulations will apply to various transactions, including global payments or transfers made with virtual assets, settlements of card transactions, and transfers from self-custody wallets.
### Expanding Reporting Requirements
A source indicated that the government is approaching the matter with caution. Although the central bank has issued revised definitions, the specific tax requirements will depend on further guidance from Brazil’s federal tax authority. As of November 17, reporting obligations for crypto activities have broadened, now encompassing foreign service providers operating within Brazil’s jurisdiction.
