Brazil wants more visibility into cryptocurrency trades

Over the past few months, there has been some movement in the Brazilian political sphere which seems to be targeting increased transparency and auditability for cryptocurrency transactions.

New regulation has been approved that requires users to disclose more information about their cryptocurrency trades, and businesses are now required to register their holdings as well. Taxes have also been clarified and new measures are being discussed which could add additional taxes to any crypto-to-fiat trading.

Brazil favoring the regulation of cryptocurrencies

As reported by Coin Rivet last month, the Brazilian Department of Federal Revenue (RFB) has implemented new regulation that covers all kinds of crypto-related activities, such as buying and selling, donations, barters, deposits, and withdrawals.

This rule applies mainly to businesses – especially crypto exchanges – although any individual who transacts more than R$30,000 on a monthly basis, or around $7,000 at the current rate, will also have to send this information to the RFB.

The measure requires companies or individuals to provide monthly reports by the end of the month following the month when the crypto-related transactions occurred. For example, any information for the month of August should be provided by the last business day of September.

Furthermore, the Central Bank of Brazil (Bacen) has officially recognised Bitcoin and cryptocurrencies as monetary assets which can be used as a means of payment. The trading of digital assets by Brazilians will now also be included in the country’s balance of trade statistics.

These actions show that the Brazilian government wants cryptocurrency trading to be a taxable event, supporting the new companies that are emerging by giving them a path to do business.

Is Brazil adding visibility by increasing taxes?

Following the swathe of taxation news coming from Brazil, some have suggested that adding taxes to fiat-to-crypto transactions could potentially help the Bitcoin market.

By requiring citizens to disclose any purchases or gains, Brazilians may opt to stay in the cryptocurrency market rather than cash out. This would result in increased liquidity as well as higher Bitcoin prices in the local currency.

For example, transferring your funds from your bank account to a brokerage account would incur a 0.40% taxation rate. In theory, it would be a 0.20% tax on those who deposit in addition to a 0.20% tax on those who receive, but this rate will probably be passed on to exchange customers.

For P2P purchases, the operation would be the same – the seller would already add the tax to the final value of the cryptocurrency transaction, making Bitcoin more expensive to buy.

By contrast, crypto-to-crypto transactions between people would not be taxable and could eventually be used to circumvent the new tax.

Given the current regulatory environment favoring the use of cryptocurrencies, by giving businesses a clear way to deal with Bitcoin and with the addition of taxes, we could see crypto-to-crypto transactions taking off in Brazil.