FinTax: Decoding the Regulatory Logic Behind Brazil's Virtual Asset Law Revision

Author: FinTax

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In December 2025, a committee under the Brazilian House of Representatives approved the revised bill for the “Virtual Assets Law” (PL 4308/2024). Building on the original “Virtual Assets Law” (Marco Legal dos Ativos Virtuais, No.14.478/2022), the bill introduces a series of rules regulating stablecoin issuance. Currently, the bill is still under legislative review and has not been officially enacted. If passed, it will establish a preliminary stablecoin issuance system within Brazil’s crypto asset regulatory framework.

As Latin America’s largest cryptocurrency market, stablecoins are widely used in local trading and cross-border payments. Reports indicate that from July 2024 to June 2025, Brazil’s crypto trading volume reached $318.8 billion, a 109.9% year-over-year increase, with stablecoins accounting for over 90%, roughly one-third of Latin America’s total crypto activity. Clearly, passing the revised bill will significantly impact Brazil’s stablecoin market landscape and future development. This article reviews the current state of crypto asset and stablecoin regulation in Brazil, analyzes the regulatory trends reflected by the bill and its potential impacts, providing compliance references for industry practitioners.

1 Overview of Brazil’s Crypto Asset Regulation

1.1 Regulatory Framework: BCB Dominance with CVM Cooperation

Brazil has established a layered crypto regulation framework led by the Central Bank of Brazil (Banco Central do Brasil, BCB), with the Securities and Exchange Commission (Comissão de Valores Mobiliários, CVM) participating collaboratively. Specifically, the “Virtual Assets Law” authorizes federal agencies to determine the regulatory authority for virtual asset service providers (VASPs) via executive decree. Subsequently, Presidential Decree No. 11,563/2023 designates the Central Bank as the regulator responsible for virtual asset services, without altering CVM’s existing authority over security tokens.

In summary, the Central Bank oversees VASP licensing, anti-money laundering (AML), foreign exchange controls, and related activities involving exchanges, custodians, and crypto economic operations; CVM exercises regulatory authority over securities tokens when applicable, including issuance and market activities.

1.2 Core Legal and Policy Framework

Brazil’s crypto regulation legal framework is similar to the above structure: firstly, based on the “Virtual Assets Law,” with implementing resolutions No. 519, 520, and 521 issued by the Central Bank establishing a VASP-centered regulatory system; secondly, based on CVM’s Opinion No. 40/2022, which applies securities market regulations to security tokens.

The “Virtual Assets Law,” enacted by Brazil’s Congress in December 2022, provides a foundational legal framework for crypto asset regulation. It explicitly defines crypto assets as “digital representations of value” that can be traded or transferred electronically and used for payments or investments. This indicates that cryptocurrencies in Brazil are neither considered legal tender nor securities; instead, they are classified as assets or property. The law also requires VASPs to obtain authorization to operate, comply with AML and counter-terror financing regulations, and criminalize virtual asset fraud.

Building on this, the Central Bank issued Resolutions No. 519, 520, and 521 in November 2025, which took effect on February 2, 2026, with key points including:

1.3 Crypto Taxation and Regulatory System

Brazil has not enacted specific crypto taxation laws but incorporates crypto assets into existing tax systems, establishing mandatory information disclosure regimes for oversight. Specifically, under the “Virtual Assets Law,” crypto assets are regarded as “digital representations of value,” and in the tax system, they are treated as assets or property rights rather than currency. The Federal Revenue Service of Brazil (Receita Federal do Brasil, RFB) further established a mandatory reporting system for crypto transactions via Directive IN RFB No. 1,888/2019, requiring market participants to report transaction data monthly through electronic systems.

To align with OECD standards, Brazil updated this system in 2025 via IN RFB No. 2,291/2025, introducing a new Declaração de Criptoativos (DeCripto) reporting system, with a transition period: the old system remains valid until June 30, 2026, after which the new system via e-CAC monthly reports will fully replace it, and IN 1,888/2019 will be repealed.

Regarding tax rates, holding crypto within Brazil is not taxed directly; however, disposal activities such as sale, payment, or redemption that generate income are taxable events, with different rates for individuals and corporations.

For individuals, Brazil’s tax system distinguishes between domestic and foreign operations, applying different exemption thresholds and rates. Domestic operations refer to transactions conducted on Brazilian exchanges or domestic entities by tax residents, with gains taxed as capital gains. Foreign operations involve disposal through foreign entities, considered “foreign financial investments,” taxed at a flat 15% annual rate with no monthly exemption.

For corporations, taxation depends on the nature of the business: exchanges, custodians, or brokers’ income is considered operational revenue and taxed under corporate income tax; other companies holding crypto assets are taxed on gains as financial or intangible assets.

2 Overview of Stablecoin Regulation in Brazil

2.1 Legal Status and Current Regulatory Framework

In Brazil, stablecoins (ativos virtuais referenciados em moeda soberana) are classified as “digital representations of value” under the “Virtual Assets Law.” Resolution No. 520 defines stablecoins as “virtual assets backed by reserve assets,” emphasizing full reserves and price stability mechanisms. Besides general crypto asset regulations, Resolution No. 521 classifies stablecoin transactions used for international payments or cross-border transfers as foreign exchange transactions, requiring compliance with FX regulations. Once integrated into the FX system, stablecoin transactions are regarded as international fund transfers, needing authorization from licensed FX market participants and adherence to FX management rules.

2.2 Government Attitudes and Phased Regulatory Changes

Brazil’s approach to stablecoin regulation has evolved in phases, similar to its crypto asset regulation history.

From 2018 to 2022, the focus was on the overall crypto market, with no specific regulation for stablecoins.

Between 2023 and 2024, the “Virtual Assets Law” came into effect, classifying stablecoins as general crypto assets, but regulation remained at a principle-based level without specific restrictions. However, since 2024, with stablecoins accounting for over 90% of crypto trading, regulators have become concerned about associated risks. The Central Bank began drafting specific rules for stablecoins, discussing reserve requirements, peg mechanisms, and cross-border use, showing a cautious stance.

In November 2025, the Central Bank issued the three resolutions mentioned above, formally incorporating stablecoins into the FX framework, signaling that the government views stablecoins as high-risk FX equivalents, aiming to prevent capital outflows, money laundering, and systemic risks through stricter compliance standards. The December 2025 amendments further prohibit algorithmic stablecoins and require 100% reserve backing, reflecting a cautious attitude and using reserve requirements, criminal penalties, and local licensing to prevent market manipulation and capital flight.

3 Focused Impact of the Proposed Stablecoin Law Amendments

3.1 Key Points of the Amendments

The amendments supplement the existing “Virtual Assets Law,” focusing on stablecoin issuance. The main changes include:

First, a comprehensive ban on algorithmic stablecoins. The bill states: “Prohibit the issuance, offering, distribution, or listing of any virtual asset that seeks to maintain its reference value solely through algorithmic mechanisms without corresponding reserves.”

(Art. 13-A §2: It is prohibited to issue, offer, distribute, or list virtual assets that aim to maintain reference value solely through algorithmic mechanisms without the corresponding reserve.)

International financial stability organizations like the Financial Stability Board (FSB) and the Bank for International Settlements (BIS) have noted that algorithmic stablecoins often lack full collateral backing and rely solely on algorithms to maintain value, making them high-risk assets prone to decoupling or systemic collapse. The 2022 Terra Luna crash is a notable example. This regulation appears to respond to recent collapses of stablecoins like Terra and Luna, aiming to protect retail investors and maintain systemic stability by banning such high-risk instruments.

Second, mandatory 100% reserve backing for stablecoins. The bill states: “Stablecoins pegged to fiat currency must be fully backed by the issuer’s designated reference assets or currency, and issuance without reserves is prohibited.”

(Art. 13-D §2: Virtual assets referenced in fiat currency must be fully backed by the issuer’s specified reference assets or currencies, with issuance without reserves prohibited.)

Additionally, issuers located in Brazil must maintain segregated, auditable reserves, publicly disclosed periodically according to Central Bank regulations.

(Art. 13-D §4: Domestic issuers shall maintain segregated, auditable reserves, with public disclosure at intervals and formats specified by the regulatory authority or the designated public agency.)

This requirement ensures stablecoins are backed by safe, liquid assets, with reserve segregation to prevent misuse and ensure redemption capacity.

Third, issuing stablecoins without full reserves will be criminalized. The bill states that such issuance will be classified as fraud, punishable by up to 8 years in prison and fines. By introducing criminal penalties, the bill elevates the legal consequences from administrative violations to criminal offenses, strengthening deterrence against issuing unbacked stablecoins.

Fourth, restrictions on foreign stablecoins within Brazil. The bill stipulates that stablecoins issued by foreign entities circulating in Brazil must be transacted through authorized VASPs. Foreign issuers must be subject to regulation equivalent to Brazil’s; if not, VASPs must conduct risk assessments. VASPs are also required to perform due diligence on foreign issuers’ legitimacy, governance, and reserve backing. The Central Bank retains discretion to impose additional eligibility and transparency requirements on foreign-issued stablecoins anchored to the Brazilian real.

3.2 Regulatory Signals

The bill’s key points—banning high-risk algorithmic stablecoins, mandating full reserves, criminalizing unbacked issuance, and tightening cross-border controls—reflect Brazil’s recent regulatory approach: prioritizing financial stability, investor protection, and AML, with zero tolerance for high-risk models, but leaving room for compliant domestic innovation.

Stablecoins account for over 90% of Brazil’s crypto trading volume, mainly used for cross-border payments and settlements. They have become “dollar-like” payment tools to hedge exchange rate volatility and reduce cross-border costs. Holding stablecoins is akin to holding unregulated USD accounts abroad. Over time, this could weaken the real’s role in monetary policy transmission and threaten monetary sovereignty. Fully opening stablecoin issuance could also undermine capital controls and pose systemic risks. Therefore, the bill aims to regulate issuance, restricting stablecoin creation to mitigate these risks.

Brazil does not ban stablecoins outright but adopts a restrictive legislative approach—acknowledging their practical value in payments and cross-border trade while regulating issuance to prevent systemic risks and sovereignty threats. Given their market share, a total ban would disrupt existing users and cause market chaos or capital flight, which are harder to regulate.

Brazil, with a history of high inflation and exchange rate volatility (average inflation from 1980–2025 around 295.47%, peaking over 6800% in 1990; high currency volatility), benefits from stablecoins’ low-cost, instant cross-border payment features, enhancing financial inclusion.

Brazil’s Central Bank Governor Roberto Campos Neto publicly stated in 2024 that Brazil is advancing digital finance initiatives like Pix, open banking, and tokenization, emphasizing the importance of building programmable, open financial infrastructure. After the Central Bank’s decision to suspend the domestic digital currency Drex’s blockchain component, allowing local compliant institutions to issue stablecoins complements the digital ecosystem.

3.3 Market Impact

The amendments will significantly raise the entry barriers and compliance costs for stablecoin issuance by banning algorithmic stablecoins, mandating 100% reserves, imposing criminal penalties, and tightening cross-border access controls. These changes could also impact crypto trading activities.

Primarily, non-compliant transactions will exit the Brazilian market, with compliant transactions concentrated on authorized local platforms. Currently, most stablecoin trading occurs OTC, via non-local exchanges and sub-custodial wallets, without local intermediaries. The ban on algorithmic and unbacked stablecoins, plus the requirement that all fully backed stablecoins be traded through authorized VASPs, may push foreign stablecoin platforms to seek local licensing or partner with existing authorized VASPs.

Second, the law will influence capital outflows and their costs. Foreign stablecoin transactions must go through local VASPs, which are subject to information collection and reporting obligations. Post-implementation, cross-border flows via stablecoins will be more traceable and reportable, reducing unreported capital movements. Stablecoins will shift from being capital flight tools to compliant cross-border payment instruments.

Third, the law could foster the emergence of local stablecoins. The Central Bank can impose additional access conditions on foreign stablecoins. For example, stablecoins pegged to foreign currencies already face mandatory intermediary circulation, due diligence, and higher compliance costs. Stablecoins pegged to the real may also face stricter entry requirements, raising costs for foreign issuers. Under high compliance costs and strong local demand, issuing real-pegged stablecoins domestically becomes a more rational and economically viable option, creating a competitive advantage for local issuers.

3.4 Industry Compliance Strategies

Although the law has not yet become effective, it signals a strong regulatory stance. As Latin America’s largest crypto market, Brazil’s regulatory developments are influential. Industry participants aiming to enter Brazil should prepare early to seize compliance advantages.

Local issuers, such as banks capable of stablecoin issuance, can initiate fiat-pegged stablecoin projects, designing full reserve structures per the law, leveraging the new restrictions on foreign stablecoins to create barriers.

Local VASPs should upgrade due diligence processes, verifying issuer regulation, reserve backing, and governance, establishing a whitelist for foreign stablecoins, and reducing exposure to algorithmic stablecoins.

Foreign issuers seeking to retain market share should actively collaborate with authorized local VASPs or consider establishing subsidiaries in Brazil to issue domestic fiat-backed stablecoins. If deep localization is not desired, compliance measures must be adopted accordingly.

4 Future Outlook for Brazil’s Stablecoin Regulation

Brazil’s evolving crypto regulation reflects a balancing act between innovation and stability in emerging markets’ digital economies. Future regulation may continue to adopt a cautious, institutionalized approach, but authorities are also aware of the market demand driven by digital economy and payment innovations, leaving room for compliant innovation under risk control. Additionally, as global stablecoin regulation tightens and standards converge, Brazil’s regulatory framework will likely be influenced by international norms and cross-border cooperation. How Brazil’s system will reconcile its domestic financial structure, monetary policy goals, and international regulatory trends remains to be seen through practical implementation.