Recently, Brazil’s Special Department of Federal Revenue announced its plans to collect information from foreign crypto exchanges to ensure compliance with local regulations. This move comes as part of the tax department’s efforts to understand how these exchanges operate in the country and to uncover any potential illegal activities. Deputy Secretary of Inspection, Andrea Chaves, emphasized the importance of ensuring that foreign exchanges are interacting with local service providers and providing the necessary details mandated by regulations introduced in 2019.
The tax department’s main focus will be on collecting information about Brazilian wealth that should be subject to taxes. Unlike local exchanges in Brazil, foreign companies are not required to report transactions. This lack of transparency has raised concerns within the tax department, prompting them to summon foreign exchanges to provide the necessary information to ensure compliance with local tax laws. The expected release of an ordinance will further solidify the tax department’s stance on enforcing tax compliance among foreign exchanges operating in the country.
Recent data from the tax department indicates a significant increase in the reporting of crypto assets by individuals and legal entities in Brazil. In the first half of 2023, tax reporters declared 133.6 billion reals ($24.6 billion) worth of crypto assets, with 14.5 billion reals ($2.7 billion) coming from foreign exchanges. These numbers represent substantial growth compared to the previous year, highlighting the increasing activity in the country’s crypto market. The tax department plans to release updated data through a technological update to provide a more accurate picture of the current state of crypto holdings in Brazil.
Third-party research data also supports the trend of growth in Brazil’s crypto market. According to a report by Kaiko Research, crypto trading volume involving the Brazilian real reached $6 billion between January and early May 2024. This represents a 30% increase from the previous year and surpasses US dollar trading volumes. Brazil has emerged as the largest crypto market in Latin America and the seventh-largest fiat currency market globally, indicating the country’s growing prominence in the crypto space.
The Brazilian tax department’s decision to scrutinize foreign crypto exchanges reflects a broader effort to ensure tax compliance and transparency in the country’s burgeoning crypto market. With the expected release of new regulations and increased enforcement measures, foreign exchanges operating in Brazil will need to adapt to these changes to comply with local laws and regulations. The growing interest and activity in Brazil’s crypto market further underscore the need for comprehensive oversight to protect investors and maintain the integrity of the financial system.
