Brazil

**Report on the Current Status of Retail Trading in Brazil**

**Date:** 2025-06-26

**Topic:** Retail_Trading_Status

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

**1. Identified Status:**

Allowed-Regulated

**2. Detailed Narrative Explanation:**

Retail cryptocurrency trading, including buying, selling, and holding, is legally permitted in Brazil and is subject to a developing regulatory framework. The Brazilian government has taken significant steps to formalize the crypto-asset sector, aiming to provide legal certainty, protect investors, and prevent illicit activities.

Historically, Brazil's engagement with cryptocurrencies began with a cautious approach, with the Central Bank of Brazil (BCB) initially stating in 2014 that "virtual currencies" were not covered by existing electronic payment regulations. However, recognizing the growing adoption and potential of digital assets, Brazil has moved towards a more structured regulatory environment.

A key piece of legislation is **Law No. 14.478/2022**, often referred to as the Brazilian Virtual Assets Law (BVAL), which came into effect on June 20, 2023. This law establishes guidelines for the provision of virtual asset services and regulates virtual asset service providers (VASPs). It defines a "virtual asset" as a "digital representation of value that can be traded or transferred by electronic means and used for payments or investment purposes," excluding national and foreign fiat currencies, electronic money under specific existing law, loyalty program points, and regulated securities. Importantly, the BVAL does not apply to virtual assets that represent securities, which remain under the purview of the Brazilian Securities and Exchange Commission (CVM).

**Regulatory Authorities and Licensing:**

Decree No. 11.563/2023, issued on June 13, 2023, appointed the **Central Bank of Brazil (BCB)** as the primary regulator responsible for authorizing and supervising VASPs. VASPs, defined as legal entities performing services like crypto-to-fiat exchange, crypto-to-crypto exchange, virtual asset transfers, custody or administration of virtual assets, or participation in financial services related to the offering or sale of virtual assets, must obtain prior authorization from the BCB to operate in Brazil. This includes a requirement for VASPs to have a legal entity registration number (CNPJ) in Brazil.

The BCB has been actively working on developing detailed regulations for VASPs. Public consultations were held, with the first round concluding in January/February 2024/2025, focusing on aspects like asset classes, authorization requirements, operational activities in the foreign exchange market, AML/CFT measures, risk management, and asset segregation. A second round of public consultation was planned for the latter half of 2024, with new rules anticipated to become effective in 2025. As of June 2025, the BCB is also seeking public input on new accounting rules for digital assets.

**KYC/AML Requirements:**

The BVAL and subsequent regulatory efforts emphasize compliance with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) standards, aligning with Financial Action Task Force (FATF) recommendations. VASPs are mandated to implement robust Know Your Customer (KYC) and AML protocols. This includes verifying user identities and reporting suspicious transactions to the Council for Financial Activities Control (COAF). Major Brazilian exchanges already require full KYC verification, including the submission of ID documents and proof of address.

**Taxation:**

Cryptocurrencies are legally recognized as financial assets in Brazil for tax purposes. The Brazilian Federal Revenue Service (Receita Federal do Brasil - RFB) has established reporting requirements for both individuals and exchanges.
*   **Reporting by Individuals:** Individuals must declare their virtual asset holdings in their annual income tax returns if the acquisition cost of each type of crypto-asset is equal to or exceeds BRL 5,000. The RFB's electronic return system has specific codes for different types of crypto-assets, including Bitcoin, altcoins, stablecoins, NFTs, and other crypto-assets.
*   **Reporting by Exchanges:** RFB Normative Ruling No. 1,888/2019 requires crypto-asset exchanges to report specific transaction data from their clients. Individuals or entities engaging in transactions exceeding BRL 30,000 per month outside of Brazilian exchanges must also file a monthly statement (DME).
*   **Capital Gains Tax:** Profits from the sale of cryptocurrencies are subject to capital gains tax. Historically, there was an exemption for monthly gains below BRL 35,000. However, recent reports from June 2025 indicate a significant change: a provisional measure (Provisional Measure 1303) proposes to eliminate this exemption and impose a flat 17.5% capital gains tax on all crypto profits, regardless of the amount. This proposal has caused concern within the local crypto industry, with arguments that it could disproportionately affect small investors and push activity to offshore platforms. The measure also reportedly includes a withholding tax on yields from staking and lending. As of mid-June 2025, this provisional measure was facing opposition in Congress.

**Consumer Protection:**

The provisions of the Consumer Protection Code apply to operations carried out in the virtual asset market where appropriate. The regulatory framework aims to enhance investor protection by mandating VASP licensing and adherence to operational transparency and cybersecurity standards.

**Current Regulatory Developments (as of June 2025):**

*   The BCB is in the process of finalizing detailed regulations for VASPs, following public consultations.
*   The BCB is also working on specific regulations for stablecoins and asset tokenization.
*   A public consultation on accounting rules for digital assets held by companies is underway, with feedback invited until August 2025.
*   A controversial provisional measure proposing significant changes to crypto taxation, including the elimination of the BRL 35,000 capital gains exemption and a flat 17.5% tax, is under discussion and facing opposition.

In summary, retail trading of cryptocurrencies in Brazil is allowed but is increasingly subject to a comprehensive regulatory framework led by the Central Bank. This includes licensing for VASPs, mandatory KYC/AML procedures, and specific tax reporting obligations. While the overall direction is towards greater regulatory clarity and investor protection, some aspects, particularly around taxation, are still evolving and subject to debate.

**3. Specific, Relevant Text Excerpts:**

*   **Law No. 14.478/2022 (Brazilian Virtual Assets Law - BVAL):** "This Law provides guidelines for the provision of virtual assets services and the regulation of virtual assets service providers." (Source: Mattos Filho translation of Law No. 14.478/2022) "Virtual assets service providers may only operate in Brazil with prior authorization from a regulatory body or entity from the Federal Public Administration." (Source: Mattos Filho translation of Law No. 14.478/2022)
*   **Definition of Virtual Asset (BVAL):** "For the purposes of this Law, virtual assets are digital representations of value that can be traded or transferred via electronic means and used for making payments or investments, except for: I – Brazilian and foreign currencies; II – electronic currency...; III – instruments that provide their holders with access to specific products or services or any benefits thereof...; and IV – representations of assets whose issuance, recording, negotiation or settlement is provided for by law or regulation, such as securities and financial assets." (Source: Mattos Filho translation of Law No. 14.478/2022) (Similar definitions also cited in)
*   **Regulatory Authority (Decree No. 11,563/2023):** "On 13 June 2023, Decree No 11,563/2023 granted authority to the Brazilian Central Bank (Banco Central do Brasil or BCB) to: (1) regulate the provision of virtual asset services; (2) regulate, authorise and supervise VASPs; and (3) deliberate on other matters covered by the BVAL." (Source: Global Legal Insights)
*   **KYC/AML:** "To prevent money laundering, virtual asset service providers must keep updated records of clients (KYC – Know Your Client), as well as the records of operations and transactions involving the management of virtual assets (KYT – Know Your Transaction)." (Source: Ebury Bank) "Most major Brazilian exchanges, such as Mercado Bitcoin and NovaDAX, require full KYC verification to comply with anti-money laundering (AML) regulations. This includes submitting ID documents and proof of address before trading." (Source: KoinX)
*   **Taxation Reporting (RFB Normative Ruling No. 1,888/19):** "RFB Normative Ruling No. 1,888/19 requires cryptoasset exchanges to disclose specific transaction data from its clients..." (Source: Global Legal Insights) "Cryptoassets must also be declared by individuals to RFB in their annual income tax return, specifically in the “Assets and Rights” sheet, whenever the acquisition amount of each type of cryptoasset is equal to or in excess of BRL 5,000." (Source: Global Legal Insights)
*   **Recent Tax Proposal (June 2025):** "Brazil has enacted a sweeping overhaul of its crypto taxation policy. The country has ended its longstanding tax exemptions for small-scale crypto investors. Brazil will now impose a flat 17.5% capital gains tax on all profits from digital asset transactions. Effective from 12 June 2025, all crypto transactions – regardless of value or volume – will be subjected to a 17.5% capital gains tax." (Source: 99Bitcoins) "The new proposal would eliminate the monthly R$35,000 exemption threshold, which currently allows retail investors to trade modest volumes without incurring capital gains taxes." (Source: Forbes)
*   **Ongoing Regulatory Development (BCB Public Consultation on Accounting Rules):** "Brazil's Central Bank has initiated a public consultation to establish new accounting rules for digital assets, marking a significant step in the regulation of the growing digital asset market... The consultation process is open to various stakeholders... The Central Bank's initiative is a significant step towards integrating digital assets into the mainstream financial system, fostering innovation while mitigating risks." (Source: AInvest, referencing a Coin World report) "The Central Bank of Brazil has proposed a draft resolution to establish accounting standards for virtual assets and utility tokens, inviting public feedback until August 24, 2025." (Source: Cryptocurrency Live News & Updates)

**4. Direct, Accessible URL Links to Specific Sources:**

*   **Law No. 14.478/2022 (Official Text in Portuguese):**
    *   `https://www.planalto.gov.br/ccivil_03/_ato2019-2022/2022/lei/L14478.htm`
*   **Mattos Filho (English Translation and Analysis of Law No. 14.478/2022):**
    *   `https://www.mattosfilho.com.br/en/publication/law-no-14-478-of-december-21-2022/`
*   **Global Legal Insights - Blockchain & Cryptocurrency Regulations 2025 - Brazil Chapter (October 2024):**
    *   `https://www.globallegalinsights.com/practice-areas/blockchain-laws-and-regulations/brazil`
*   **White & Case - Brazil's legal framework for cryptoassets and upcoming regulation (April 2025):**
    *   `https://www.whitecase.com/insight-our-thinking/brazils-legal-framework-cryptoassets-and-upcoming-regulation`
*   **Bybit Learn - Crypto regulations in Brazil: What the Central Bank is planning (June 2025):**
    *   `https://learn.bybit.com/crypto-regulation/brazil-crypto-regulation/`
*   **KoinX - Top Crypto Exchanges in Brazil for Buying Bitcoin & Altcoins in 2025 (June 2025):**
    *   `https://koinx.com/crypto-exchanges/brazil/`
*   **Kraken - Brazil crypto tax guide 2025 - Latest RFB updates:**
    *   `https://www.kraken.com/learn/brazil-crypto-tax-guide`
*   **Forbes - Brazil’s Crypto Sector Sounds Alarm Over Surprise Tax Proposal (June 16, 2025):**
    *   `https://www.forbes.com/sites/kenrapoza/2025/06/16/brazils-crypto-sector-sounds-alarm-over-surprise-tax-proposal/` (Note: Forbes has a paywall, direct deep link might be restricted, but the article title and date are searchable)
*   **99Bitcoins - Brazil Ends Crypto Tax Exemptions, Will Now Charge 17.5% Capital Gains Tax (June 16, 2025):**
    *   `https://99bitcoins.com/brazil-ends-crypto-tax-exemptions-will-now-charge-17-5-capital-gains-tax/`
*   **Notabene - Travel Rule Crypto in Brazil by the BCB:**
    *   `https://notabene.id/crypto-travel-rule-brazil`
*   **AInvest - Brazil's Central Bank Seeks Public Input on Digital Asset Accounting Rules (June 26, 2025):**
    *   `https://www.ainvest.com/news/brazil-s-central-bank-seeks-public-input-on-digital-asset-accounting-rules-2616972757cb0277dfa81878/`
*   **Bitcoin.com - Brazil to Open Public Consultation to Implement New Accounting Rules for Digital Assets (June 26, 2025):**
    *   `https://news.bitcoin.com/brazil-to-open-public-consultation-to-implement-new-accounting-rules-for-digital-assets/`
*   **Library of Congress - Brazil: New Law Regulates Cryptocurrency (March 2023):**
    *   `https://www.loc.gov/item/global-legal-monitor/2023-03-01/brazil-new-law-regulates-cryptocurrency/`
*   **Wyden - Navigating Brazil’s Virtual Asset Law for VASPs (October 2024):**
    *   `https://www.wyden.io/insights/navigating-brazils-virtual-asset-law-for-vasps`
*   **Ebury Bank - New regulation for crypto market in Brazil (December 2023):**
    *   `https://www.ebury.com.br/blog-empresa/nova-regulamentacao-para-o-mercado-de-criptomoedas-no-brasil/` (Link is in Portuguese, content relates to the new regulation)
*   **Demarest - Law No. 14,478/2022, that establishes the guidelines of the Cryptoasset sector in Brazil, is published in the Official Gazette (December 2022):**
    *   `https://demarest.com.br/en/bulletins/law-no-14-478-2022-that-establishes-the-guidelines-of-the-cryptoasset-sector-in-brazil-is-published-in-the-official-gazette/`
*   **CoinLedger - Brazil Crypto Tax: Ultimate Guide 2025:**
    *   `https://coinledger.io/guides/brazil-crypto-tax`
*   **KoinX - How to Declare Crypto on Your Brazilian Tax Return in 2025? (June 2025):**
    *   `https://koinx.com/tax-guides/how-to-declare-crypto-on-your-brazilian-tax-return/`
*   **Cryptocurrency Live News & Updates (referencing BCB proposal on accounting standards, June 26, 2025):**
    *   Searchable by headline "Brazil's Central Bank Unveils Virtual Asset Standards" on crypto news aggregators. A direct persistent link to a specific news item on such platforms can be volatile. The specific update was noted on June 26, 2025.
*   **Sanctions.io - AML Compliance Guidelines: Brazil (January 2025):**
    *   `https://sanctions.io/blog/aml-compliance-guidelines-brazil/`
*   **Binance Square - The Brazilian Market and Cryptocurrencies: Regulation and Growth in 2025 (March 2025):**
    *   `https://www.binance.com/en/feed/post/20250309000000-the-brazilian-market-and-cryptocurrencies-regulation-and-growth-in-2025-tu-pac-amaru-das-cripto` (Content is user-generated but reflects market understanding)