Brazilians are some of the most active people in the crypto sector. The country is ranked amongst the top seven nations by the number of crypto exchanges. It is also among the top five nations by the number of crypto owners.
Brazil Tax System
The latest regulatory measures by Brazil touch on taxation of the sector. This has caused two large crypto exchanges in the country to consider shutting down their operations. This is after the leading bank in the country refused to abide by an agreement that would have prevented shutting down accounts at these crypto exchanges.
Banco Bradesco, which is the largest commercial bank in Brazil, expressed fears that digital assets could cause an increased risk of money laundering. As a result, they are not willing to abide by any requirements of the Brazilian Association of Cryptocurrencies and Blockchain. Reports in Brazil indicate that more commercial banks plan to cease offering support to crypto exchanges in the country.
As a result, most digital asset brokers say they are ready to shut down all operations in the country. Failure to comply with these tough rules could lead to serious fines and even jail time. These rules were created in line with the EU’s AMLD5 rules that have caused various crypto exchanges in Europe to shut down. In some cases, crypto businesses in the EU have been forced to relocate to other jurisdiction outside the EU.
Crypto Exchange Compliance
One of the main reasons why crypto exchanges are shutting down is the cost of compliance. This comes at a time when exchanges are experiencing reduced profits. Pedro Nunes, the co-founder of Acesso Bitcoin, said that the new regulation had caused a decrease in trading volumes. As a result, smaller exchanges are unable to survive.
One other exchange that has confirmed that it is shutting down is Latoex. The exchange plans to shut down due to difficulties fulfilling the new tax requirements. It now plans to sell its assets and return the fund to its clients.
Brazil Tax Authority
There is currently a pair of bills under consideration in Brazil. The first bill wants to regulate the provision of certain types of services in the crypto sector. This bill would allow regulation of crypto services by the countries central bank. The second bill wants to clarify that cryptocurrencies are securities. This would essentially make it easier to issue, transfer, and use crypto.
Both of them are still in the early stages. However, the federal tax agency of Brazil has said that those holding crypto must declare their holdings in their income return forms. Crypto is listed under other assets. Holders of crypto must declare income tax for any capital gains they made when selling crypto. However, this rule only applies if they sold over BRL 35,000 worth of crypto in a given month. The tax rates in Brazil vary from 15% to 22.5% for the crypto sector.
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