By
Anisha Pandey
June 25th, 2024
Despite the lack of a clear regulatory framework, the government still wants to know how Binance, Coinbase, Kraken, OKX, and other exchanges registered outside of its border conduct their businesses within the country.
In a bid to tighten regulations and increase transparency in the crypto sector, Brazil’s tax authority, Receita Federal, is planning to call on digital assets service providers in the country to provide detailed information regarding their operations in the country. The move is aimed at understanding their operations and ensuring compliance with local tax regulations.
New Ordinance and Objectives
According to an exclusive report by Reuters, the Brazilian government will issue an ordinance this week, mandating these foreign exchanges to disclose their activities and how they service customers in the region.
Currently, Brazil is yet to establish a comprehensive regulatory framework to regulate the use of digital assets and how exchanges are expected to operate within the country.
Earlier this year, the central bank announced that the country could introduce proposals for crypto regulation by the end of 2024, following the successful completion of its second public consultation released in May. The bank initially expected the parliament to round up the regulation of cryptocurrencies as well as service providers by June this year. However, plans changed and the government now anticipates the lawmakers to begin discussing potential proposals towards the end of the year.
Despite the lack of a clear regulatory framework, the government still wants to know how Binance, Coinbase, Kraken, OKX, and other exchanges registered outside of its border conduct their businesses within the country.
While these companies are exempted from providing information regarding customer data and transactions under the current Brazilian law, Andrea Chaves, Deputy Secretary of Inspection at the Federal Revenue Service, said the government needs to ascertain the companies are not violating the country’s anti-money laundering rules.
Additionally, he said there is a need to ensure that they are not providing illegal services to customers in the country.
“We need to understand how these exchanges operate in Brazil and ensure there is no illegality. Additionally, we seek information on Brazilian assets that are subject to taxation,” Chaves stated.
Surge in Crypto Activity
Another executive of the Revenue Service Wagner Lima, who serves as a risk management coordinator, said that the government also wants to review how the foreign exchanges work with local service providers to ensure they comply with a 2019 regulation requiring information sharing.
Meanwhile, this regulatory effort comes in response to a significant increase in digital asset usage in Brazil. From January to July 2023, Brazilians reported holding 133.6 billion reais ($24.6 billion) in crypto assets, a 36.6% rise from the previous year.
Interestingly, according to the report, 14.5 billion reais of the total holdings were declared through foreign exchanges, showing a 51.2% increase from the previous record in 2022.