Brazil's Plan to Tax Cryptocurrency Ignites Debate Over Regulation and Investor Protections

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Brazil's Plan to Tax Cryptocurrency Ignites Debate Over Regulation and Investor Protections

Bitget-RWA2025/11/19 20:34

By:Bitget-RWA

- Brazil plans to tax cross-border crypto transfers via IOF expansion, targeting $30B annual revenue loss from unregulated stablecoin flows by 2025. - Stablecoins like USDT , dominating 2/3 of Brazil's crypto volume, face stricter forex rules amid concerns over money laundering and informal currency exchange. - Lawmakers clash over crypto policies: one bill seeks tax exemptions for long-term investors, while another proposes court powers to confiscate crypto linked to cybercrime. - The government's dual st

Brazil Considers Crypto Tax on International Transactions as Lawmakers Propose Asset Seizure Authority

Brazil is moving forward with plans to introduce a tax on cross-border cryptocurrency transactions, aiming to close regulatory gaps and bring its rules in line with international practices. The government is looking at broadening the Imposto sobre Operações Financeiras (IOF)—a tax on financial operations—to cover stablecoin transfers, which have been redefined as foreign exchange transactions under new central bank guidelines. This plan,

anticipated to start in February 2025

, is designed to tackle an estimated $30 billion yearly shortfall in tax and customs revenue from unregulated crypto activity, as well as to fight money laundering and tax avoidance.

The new tax proposal would bring Brazil in line with the OECD’s Crypto-Asset Reporting Framework (CARF), which requires countries to share information internationally to prevent tax evasion. On November 14,

the Federal Revenue Service introduced updated reporting obligations

to adhere to CARF, giving authorities access to Brazilians’ offshore crypto assets through a global network. This is similar to steps taken by the

Brazil's Plan to Tax Cryptocurrency Ignites Debate Over Regulation and Investor Protections image 0

UAE,

highlighting a worldwide effort to oversee digital currencies

. Stablecoins such as Tether’s

USDT

, which account for about two-thirds of Brazil’s crypto transactions, are a primary concern, as regulators

caution they are increasingly being used

for unofficial currency exchanges and illegal financial dealings.

Political friction has surfaced as legislators oppose the tax. A bill put forward by Deputy Eros Biondini

aims to exclude long-term crypto holders

from capital gains taxes, claiming the current rates are too high. Although the bill faces significant obstacles in Congress, it highlights the ongoing debate between crypto supporters and regulators focused on oversight. Separately, Deputy Chrisóstomo de Moura has suggested

giving courts extensive authority

to freeze or seize crypto assets tied to cybercrime, including digital wallets and traditional bank accounts. The proposal also calls for the creation of a National Fraud Victims Compensation Fund to speed up restitution.

The central bank’s decision to treat stablecoin transactions as foreign exchange operations is the basis for the tax change. This adjustment,

set to begin in February 2025

, will subject stablecoin buying, selling, and trading to the same rules as regular currency transfers. Officials estimate that crypto transactions totaled $42.8 billion in the first half of 2025, with stablecoins making up the majority of this volume.

The industry’s response has been divided. While the tax could discourage the use of stablecoins for remittances and cross-border payments, it may also provide much-needed revenue for Brazil as it faces fiscal challenges.

The Finance Ministry has not issued a public statement

about the proposal, citing ongoing confidential talks. Meanwhile, Brazil’s central bank has implemented broader crypto regulations, including

compulsory licensing for crypto exchanges

and tighter anti-money laundering (AML) protocols.

The government’s twin strategies—taxation and asset seizure powers—demonstrate a comprehensive approach to bringing digital assets into the formal financial sector while managing associated risks. However, critics argue these measures could hinder innovation in a market already burdened by high compliance costs. As Brazil adapts to these regulatory changes, the results are likely to shape crypto policy throughout Latin America.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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