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Crypto Exchanges& Regulation in Brazil

Top exchanges in Brazil by Coincub criteria
Article review author
Jonathan Lea
Brazil head image

Crypto Country Rating: 7.5/10

7.5/10
Institutional acceptance
Brazil decides not to follow El Salvador with bitcoin as legal tender. Crypto still able to make purchases, however.
8/10
Exchanges & Wallets availability
All leading names available
8.5/10
Government regulation
New progressive legislation to cryptoeconomy safer for investors
5/10
Defi acceptance
Defi still debated with little action
8.5/10
Financial services
Backdown of legal tender status for bitcoin but improved regulation should stimulate trade.
8/10
Transparency
Important new legislation to tighten up crypto industry
6/10
Spending crypto
Booming crypto economy but not much to spend on - much depends on new legislation
8.5/10
Banks activity in crypto
Banks looking to adopt certain blockchain advantages leading large bank offering direct investment in crypto

Bitcoin and crypto trading in Brazil

Not so long ago Brazil even considered a move towards making Bitcoin legal tender, but in recent months the country has taken a more steady and thoughtful approach to bring crypto within the mainstream. New laws being put to vote to involve the creation of a – some would say long-awaited regulatory body to oversee the brokerage of ‘virtual currencies’ – in other words of cryptocurrencies.
The move is an important step forward for Brazil, and part of a wider strategy to get on top of the country’s runaway infatuation with crypto by huge numbers of the population, predominately the poorer sections, and, of course, to curtail fraud, money-laundering and crypto-related crime.

Brazil, along with Mexico and Argentina, has a large population that has been only too keen to use crypto for ‘peer-to-peer’ transactions such as sending and receiving money in day-to-day transactions and exchanges. This way of conducting money transfers, albeit through the use of crypto, is often the only alternative open for people who do not have traditional – and unaffordable – bank accounts. This being the case, Bitcoin trading volumes in Brazil are one of the highest in the world – there are also a healthy number of Bitcoin nodes operating in the country too.

The forthcoming regulation – which has still to be passed at the time of writing – also marks Brazil up a few places on the Coincub crypto ranking, as clear and sensible regulation often promotes more and safer usage of crypto than when the market is left without governance. When it comes to taxation, Brazil, as with many countries around the world, has yet to draw up crypto-specific tax policies – in other words, any income derived from crypto, including mining Bitcoin, simply has to be declared alongside general income and the gains taxed accordingly. Additionally, income tax statements take into account any capital gains following the sale of crypto, and these are also subject to income tax.

Having a regulator for cryptocurrency overseeing crypto in Brazil brings it more into line with other countries across South America, including Paraguay, Mexico and Argentina that accept crypto but still treat it as a separate asset class – or a commodity – and definitely not as legal tender. Although on this point El Salvador is the well-publicized exception with its adoption of Bitcoin as currency. Brazil is making moves in the right direction and moving up the Coincub ranking accordingly.

 

Spend Bitcoin and cryptocurrency trading in Brazil

The crypto economy in Brazil has been booming, led, as in so many South American countries, by the people. Just like Mexico, El Salvador and others, crypto points the way to an instant, and relatively inexpensive means of conducting money transfers and payments without having a bank account. The Brazilian government is keen to harness the wave of enthusiasm for crypto, however, in the country’s cryptocurrency bill it stopped short of declaring bitcoin as legal tender as happened in El Salvador’s example. This was something of an anti-climax to many. Brazil is concentrating its efforts in more cohesive regulatory scrutiny regarding companies in the cryptoeconomy, along with increasing investor protection. Unlike Russia and China, there is no ban on using bitcoin and cryptocurrencies as payments for products and services but the country is trying to deploy stricter regulation for companies that are looking to facilitate crypto trading.

Law and crypto trading in Brazil

Brazil’s government is more than happy to accommodate developments in blockchain and cryptocurrencies. Brazil is soon to vote on a major crypto regulation bill which will permit – and regulate – crypto trading, making it safer, more secure and more transparent. The move to regulate virtual currencies was approved prior to the bill being presented for voting. Should it be accepted by the Chamber of Deputies, Brazil will be the second country after El Salvador to make bitcoin a form of legal tender.

Paying tax on my crypto trading in Brazil

Brazilians pay tax just like anybody else, and with the whole economy possibly about to include bitcoin as legal tender, paying tax on trading, lending and investing gains will be part of Brazil’s mainstream taxation strategy. As with many countries, getting to grips with the explosion of interest in crypto, Brazilian tax law has, up until now, no specific strategy for the taxation of cryptocurrency – or the wherewithal to collect it. What’s changed is that all crypto activities must now be reported in detail to the authorities by Brazilian exchanges and by the individuals themselves. The Brazilian authorities are determined to get on top of this burgeoning source of taxable revenue.

Tax relief, changing residency and gifting crypto coins in Brazil

As we mentioned above, the taxing of crypto gains has not been clearly defined, but things are changing rapidly with clear reporting required of exchanges and individuals of crypto gains. Crypto gains are taxed on sales that exceed R$35,000 per month with capital gains tax linked to the overall level of profit. If the total capital gain is under R$ 5 million the tax will be 15% and the highest tax of 22.50% for gains over R$30 million. Taxation will apply to any crypto gains prior to gifting.

Brazil crypto mining regulations

Thinking of mining crypto? It’s a highly technical and expensive activity at the best of times involving powerful computers – and lots of energy. Mining for bitcoin is legal and following a new bill and legislation it is likely that gains from mining will fall under taxable income.

Planning your retirement and investing in cryptocurrency in Brazil

In reality, despite greater security, regulation and transparency, the risks of high price volatility remain and traditional long-term investment organisations may steer clear. It is likely that any investment plan would probably carry higher fees due to the higher risks involved. 

Brazil’s financial services’ outlook on bitcoin and crypto economy

A huge cryptocurrency Bill has been passed in Brazil which stopped short of declaring bitcoin as legal tender. Bitcoin and other cryptocurrencies are not banned and are already widely accepted by Brazilians, but being unregulated comes with risks. Transactions of crypto are regulated by government departments such as the Central Bank and the Securities and Exchange Commission of Brazil (CVM). A leading Brazilian investment bank, BTG Pactual has become the first large financial institution in Brazil to enable customers to make direct investments in Bitcoin. It is the first large financial institution in Brazil to offer direct Bitcoin exposure and looks set to open the floodgates.

Brazil and DeFi, the latest developments

Brazil looked to be following the lead of El Salvador by making bitcoin legal tender but pulled out of this decision at the eleventh hour. Despite the upbeat prognosis on crypto and DeFi (decentralized finance), the Central Bank of Brazil is more focused on developing its own CBDC, the digital Real.  Decentralised finance, as in most countries, looks to be something far down the road. Many institutions popularly view DeFi as a virtual system sitting somewhat outside the mainstream of banks and exchanges and potentially a threat to the stability of the financial industry. In Brazil, as with many countries, whilst blockchain and its advantages can be assessed, full-on DeFi is a step into the unknown.

Crypto security, transparency and compliance in Brazil

Much is changing in Brazil and the regular reporting on crypto gains for tax purposes is one of them. Crypto-related businesses are keen for proactive regulation of the crypto space as it could incentivize the traditionally conservative banking system to work more actively with them. Brazil’s much anticipated new Bill covers those organisations offering virtual asset services on behalf of a third party such as exchanging to and from fiat currency, exchanging and transferring between virtual assets. These service providers will need to register and gain a permit. Remember, it was only in 2018 that major local banks suddenly shut down accounts connected to crypto platforms in the country. However, things are moving ahead rapidly. On a personal level checking the security of any exchange you wish to trade with is highly recommended. Some carry levels of insurance against loss and some have better services and security records – in all cases you’ll need to disclose identification and some personal details.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

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