BRAZIL Trends and Developments Contributed by: Vanêssa Fialdini, Mariana de Azevedo Mendonça and Jorge Augusto de Holanda Souza, Fialdini Advogados
ment structure and sufficient share and equity capital, among others. From a compliance perspective, BCB Resolution No 520 requires licensed VASPs to implement a govern- ance structure consistent with the risk profile of their activities. This includes keeping appropriate internal controls, risk management procedures, cybersecu- rity, customer protection, transparency, segregation of customer assets, recordkeeping and reporting obli- gations. The treatment of customer assets is likely to be one of the most sensitive areas. While the segregation of customer assets from the institution’s own assets was absent from Law 14,478 – unlike the legal treatment given to payment institutions by Law 12,865/2013 – BCB Resolution No 520 provided clear obligations on this topic, requiring VASPs to keep their own resources in a separate account from their customer assets and to document their asset-segregation procedures in an internal policy, subject to yearly independent audits. Following global failures in the crypto sector, regula- tors around the world have become more focused on whether customers truly own the assets reflected in their accounts, whether those assets are segregated from proprietary assets, and whether the provider may rehypothecate, lend, stake or otherwise use client assets. Brazil’s framework follows this trend by plac- ing asset segregation and risk controls at the centre of the new regime. Naturally, being subject to the supervision of the country’s financial authority framework is a relevant change to these businesses. While the crypto market as a whole now enjoys a new level of legal protection, for most entities, compliance with the regulation will require substantial investments in local compliance teams, policies and procedures, board-level govern- ance, operational risk controls, IT security and moni- toring systems. The practical impacts are significant. Smaller platforms may struggle with the cost and complexity of the new regime. Larger domestic players, financial institutions and international groups with strong compliance infra- structures may be better positioned. Banks, brokers,
payment institutions and foreign exchange institutions may also see an opportunity to enter the virtual asset market under a clearer regulatory framework. At the same time, the new regime may reduce the space for informal or undercapitalised players. The “tropicalisation” of foreign VASP activities One relevant topic brought by the new crypto regu- lation is a requirement of localisation – or, in market language, the “tropicalisation” – of services provided by foreign VASPs in Brazil. Historically, many global crypto exchanges provided services in Brazil from abroad. Brazilian clients could open accounts with foreign entities, trade crypto- assets, hold assets in offshore custody arrangements, and access stablecoin liquidity without the foreign platform having a Brazilian entity. That structure reflected the global and borderless design of many crypto platforms, but it created challenges for supervi- sion, enforcement, customer protection, tax transpar- ency and AML/CFT monitoring. BCB Resolution No 520 altered this scenario by requiring foreign institutions that provide virtual asset services in Brazil to transition their local activities and client base to a Brazilian VASP or to another institution authorised by the Central Bank by 30 October 2026, using the same transitional period granted to Brazilian pre-existing VASPs. While some key global VASPs already held a pres- ence in the country, several players of the Brazilian crypto market operate exclusively through a foreign entity, and now need to decide whether to incorpo- rate or acquire a Brazilian entity, partner with a local institution, or restrict the services offered to Brazilian residents. Each option raises legal, operational and commercial issues. The migration of client bases is not merely a regula- tory formality. It’s a significant operational undertak- ing, involving amendments to terms of service, new customer disclosures, transfer of custody arrange- ments, re-papering of contractual relationships, data protection assessments under the Brazilian General Data Protection Law, customer consent mechanisms, local tax reporting, AML/KYC review and operational
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