Brazil - Crypto penetration

intro

Brazil is the largest economy in Latin America, which legalized cryptocurrencies at the end of 2022. Amid a crypto boom(1) in Brazil, several global exchanges, like Binance, Coinbase, and Crypto.com(1¹), see the country as Latin America’s primary market in 2022.

Security level

Brazil has a very high danger security level according to our rating. Jurisdiction has 33.9 points (from 100) for safety level in Numbeo crime rating (2). The h omicide level (3) is 22.4 per 100,000 inhabitants a year. Story of firearm-related death (4) 23.93 per 100,000 inhabitants a year.

Crypto Payments

The Chamber of Deputies, a national Parliament of Brazil, has approved (5) a bill that legalizes using cryptocurrencies as a payment method within the country.

Crypto Salaries

Currently, there needs to be more regulatory certainty in this niche. According to a local blockchain entrepreneur interview(6), paying a salary in crypto is possible, but there’s still no regulation.

“It is important to highlight that there is a bill 3908/21(7) (still in progress) that suggests the payment of up to 30% of the salary in cryptocurrencies or non-fiduciary currency. Among startups, paying programmers and designers salaries is already common. Some cases for startups are: Inspireip.io, driveonauto.com, cryptomiles.net, ostenmoove.com.br and btracer.com.br”

Quote from the interview

Legal

A virtual asset is (7¹) "a digital representation of value that can be negotiated or transferred electronically and used for payments or as an investment," per the bill’s text.

Here is the text of the law (8) in Portuguese. You may see a quote from its English translation below about types of licensed activities.

Law text

I - exchange between virtual assets and national currency or foreign currency;

II - interaction between one or more virtual assets;

III - transfer of virtual assets;

IV - custody or administration of virtual assets or instruments that allow control over virtual assets; or

V - participation in financial services and provision of services related to the offer by an issuer or sale of virtual assets

According to Step review (10) all VASPs in the country need regulators’ approval and license. According to Nasdaq (11), the Central Bank of Brazil (BCB) will be in charge when Bitcoin is used as payment, while the country’s Securities and Exchange Commission (CVM) will be the watchdog when it is used as an investment asset. Both the BCB and the CVM, along with the federal tax authority (RFB), helped lawmakers craft the overhaul legislation.

Tag	Type of activity by the law	Regulator
#cryptotofiat	exchange between virtual assets and national currency or foreign currency;	National Bank
#cryptotocrypto	exchange between one or more virtual assets	National Bank
#wallet	transfer of virtual assets;	National Bank
#cryptofund	custody or administration of virtual assets or instruments that allow control over virtual assets	National Bank
#ICO/STO	Token issuance	By local SEC

New crypto regulation framework (11) in Portuguese.

If you wish, you can familiarize yourself with the following laws:

Law No. 13,874 (2020)

This law provides legal certainty to the use of cryptocurrencies in Brazil, including their use in payments, investments, and other transactions.

Bill No. 4162/2019

This bill seeks to regulate the use of digital assets such as cryptocurrencies and tokens in Brazil by establishing a framework for their registration and trading on exchanges and for taxation purposes.

Regulation No. 2,764 (2020)

This regulation sets out the rules for registering digital asset service providers with CVM (Comissão de Valores Mobiliários), the Brazilian securities regulator responsible for overseeing cryptocurrency activities in Brazil.

Operating crypto companies and their legal status

Crypto.com has obtained a Payment Institution License from the Central Bank of Brazil. The Crypto.com Visa Card has been available in Brazil since November 2021 (14)in partnership with Foris GFS BR LTDA pursuant to a Visa Worldwide Pte Limited license. Local customers can now make purchases with local fiat and their cryptos.

Binance has launched (15) a prepaid card for brazilians in partnership with Mastercard. Also, NuBank and Bank of Brazil will launch crypto operations services.

Crypto has been legal since 2019; in the fall of 2022, the president signed a new law. They began to issue licenses for crypto exchanges. The primary regulator is Banco Central do Brasil; some issues are handled by the CVM (analogous to the SEC).

Of the significant exchanges, Binance, Coinbase, Crypto.com, Mercado Bitcoin, Bitso, Foxbit have licenses. More information must be provided about the exact number of legal entities that received it. There are also crypto cards in Brazil; for example, Ripio and Binance launched their card.

In 2023, many wanted to enter this market. It is only prohibited to use exchanges here with a local license. For this reason, there are few foreign exchanges. There are illegal and gray exchangers.

Taxation

Tax name	Index
PIT tax Min	7.5
PIT tax Max	27.5
Corporate tax (CIT)	34
Min Individual CGT (for crypto)	15
Max Individual CGT (for crypto)	22.5
Wealth tax Min	0
Wealth tax Max	0

PIT

Brazil has a PIT rate from 7.5% to 27.5%, according to Worldwide Tax (16). You may also find more details from a short crypto taxation guide from a government site(17). Also, there is an Official Taxation Framework in Portuguese(18)

CGT

According to Cointelegraph (19), new tax rules for foreign crypto income will be implemented. Overseas earnings up to 6,000 Brazilian reals (~$1,200) will be exempt from taxation under the new rules. Earnings between 6,000 and 50,000 reais (~$10,000) are subject to a 15% tax rate. Above this threshold, taxes will be applied at 22.5%. Inland Capital gains tax is exempt for cryptocurrency transactions under 35,000 reals and 15-22.5% for a higher personal income.

CIT

Based on Source 1 and Source 2. Corporate income tax rate is 34%, (composed of IRPJ at the rate of 25% and CSLL at the rate of 9%. Also there is a Detailed instruction from local tax authority about crypto taxation for legal entities and exchanges (2019) (20). Information about mining taxation you can check here Mining tax source(21).

More information about crypto taxation in Brazil you can get in Global Legal Insights (22) and PWC Taxsummaries (23). At the moment, they want to increase taxes (24) on cryptocurrency exchanges to equalize residents and non-residents. The base rate without tax benefits will be 22.5%.

Links

1)Triple A. Brazil | 2022Cryptocurrency adoption in Brazil as of 2022

1¹)Crypto.com

2)Crime Index by Country 2023 Mid-Year

3)List of countries by intentional homicide rate

4)List of countries by firearm-related death rate

5) Charltons Quantum. Brazil Approves Crypto AS a Legal Payment Method. Article

6) FDR. Especialista explica como receber o salário em criptomoedas e como funciona esse ativo. Expert explains how to receive salary in cryptocurrencies and how this asset works. EDUARDA ANDRADE. Article

7)bill 3908/21

7¹)Bitcoin magazine. BRAZILIAN PRESIDENT SIGNS BILL REGULATING USE OF BITCOIN AS PAYMENT. Namcios. December 22, 2022. Article

8) Bitcoin magazine. Brazil Approves Bill Regulating Use Of Bitcoin As Payment. Namcios. November 28, 2022. Article

9)LEI Nº 14.478, DE 21 DE DEZEMBRO DE 2022. LAW No. 14,478, OF DECEMBER 21, 2022