Brazil - Crypto penetration

intro

Brazil is the largest economy in Latin America by GDP. It legalized cryptocurrencies in 2019 and approved the crypto bill in 2022. Amid a crypto boom (1) in Brazil, global crypto exchanges see the country as Latin America’s primary market. In fact, crypto companies still don't need a license to operate in Brazil. But local regulators are going to change the framework by the end of 2024.

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. Low level of security in the country is probably the main disadvantage of Brazil for digital nomads.

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 is still a regulatory uncertainty in this niche. According to a local blockchain entrepreneur interview(6), paying a salary in crypto is possible, but there’s still no formal regulation of this topic.

“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

Crypto has been legal in Brazil since 2019 based on Economic Freedom Law (8). A new law, which was signed by ex-President Jair Bolsonaro in 2022, defines virtual asset as "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 (9) in Portuguese. You may see a quote from its English translation about types of licensed VASP 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

Initially based on the law text all VASPs in the country had to get regulators’ approval and license. However, lately this requirements were postponed. It was a plan for new regulations to be implemented by the end of 2024. However, according to Reuters (10) new rules will be implemented during 2025. The reason for such a long absence of regulation, named in the Reuters publication, is the different positions of the Central Bank and the Ministry of Finance. But the situation is likely to change with the arrival of the new head of the Central Bank in January 2025.

Currently crypto companies can freely set up an entity in Brazil to operate as a crypto exchange. However, for fiat operations they need financial institution licenses. For instance, Crypto.com has obtained a Payment Institution License from the Central Bank of Brazil. Crypto.com card was availavle in the country since November 2021 (11) 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 a prepaid card for brazilians in partnership with Mastercard. Also, NuBank and Bank of Brazil launch crypto operations services. Ripio also has Payment Institution license and crypto card in Brazil.

Possible regulation updates include the following terms: 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.

If you wish, you can familiarize yourself with the following laws: PL 4401/2021 (12) and LAW Nº 14.478, OF DECEMBER 21, 2022 (13).

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 (14). You may also find more details from a short crypto taxation guide from a government site (15). Also, there is an Official Taxation Framework in Portuguese (16).

CGT

According to Cointelegraph (17), 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

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 (18) from local tax authority about corporate taxation (2019). Information about mining taxation you can check here (19).

More information about crypto taxation in Brazil you can get in Global Legal Insights (20) and PWC Taxsummaries (21). The government also presented an initiative to increase taxes (22) 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

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) 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

8) CHANGES IN THE BUSINESS ENVIRONMENT WITH THE ECONOMIC FREEDOM LAW LAW No. 13,874, DATED September 20, 2019

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

10) Reuters Brazil eyes closer regulatory cooperation with new central bank leadership

11) Crypto.com. Visa Cards Are Now Available in Brazil. November 11, 2021. Article