BRAZIL Trends and Developments Contributed by: Vanêssa Fialdini, Mariana de Azevedo Mendonça and Jorge Augusto de Holanda Souza, Fialdini Advogados
continuity planning. Foreign platforms that decide on this route will also need to consider whether their product offering can be replicated in Brazil under the new framework, particularly where the platform offers derivatives, future contracts or other tokenised secu- rities, subject to the separate regulatory framework from Brazil’s security markets regulator, the CVM. The “tropicalisation” requirement also changes the enforcement dynamic. A foreign platform with no meaningful local presence may be difficult for regu- lators and customers to hold accountable. A locally incorporated and authorised entity, by contrast, is subject to direct supervision, reporting, inspections, sanctions and local governance requirements. This is consistent with the broader regulatory objective of ensuring that crypto services offered to Brazilian users are subject to Brazilian standards of conduct and control. This development should also be viewed under the scope of tax and information-reporting trends, espe- cially considering that the regulatory framework from the Central Bank is also accompanied by a push by the Brazilian Federal Revenue Service to increase transparency and reporting obligations related to crypto-assets. The likely result is a more localised market. Some global exchanges may deepen their Brazilian pres- ence and become fully regulated players. Others may operate through partnerships with banks, bro- kers, payment institutions or local VASPs. Some may reduce or discontinue services to Brazilian residents if the regulatory burden is not commercially justified. For Brazilian users, the transition may bring both ben- efits and limitations. On one hand, users may benefit from stronger regulatory protections, clearer recourse and better segregation of assets. On the other hand, some products available on global platforms may become unavailable or may be offered only through a locally adapted version. Under this scenario, a sensitive topic is the provision of services to Brazilian residents on a reverse solici- tation basis. While the country’s legal and regulatory framework does not explicitly recognise reverse solici-
tation like the EU’s Markets in Crypto-Assets Regula- tion (MiCA), the terminology employed by the Central Bank leads to feasible understanding that providing services to Brazilian residents is allowed, provided the foreign entity is not actively operating in the country. That involves being able to demonstrate that no mar- keting is being directed towards the Brazilian market or residents and no transactions, including selling and exchanging of cryptocurrencies, are being performed in Brazil. Stablecoins and the foreign exchange market In Brazil, stablecoins have grown because they respond to practical market needs. They offer expo- sure to the US dollar, provide liquidity for crypto trad- ing, facilitate cross-border transfers and may be used as a treasury tool by individuals and companies. In a country with a history of foreign exchange controls, inflation concerns and demand for dollar-linked instru- ments, stablecoins naturally became a central product in the crypto ecosystem. However, that same functionality has attracted regu- latory attention. Under the argument that stablecoins blur the line between crypto-assets, payment instru- ments, foreign exchange transactions and offshore value transfer, the Central Bank has devoted a spe- cific set of rules regarding the usage of fiat-referenced crypto-assets through BCB Resolution No 521, which amends the existing Brazilian foreign exchange regu- lation to incorporate operations related to purchases, sales or exchanges of stablecoins, classifying them as foreign exchange operations, and applying the same classification to international payments or transfers using virtual assets. This does not mean that all stablecoin activity is pro- hibited. Rather, the objective of the Central Bank is to regulate their usage when they perform an economic function similar to foreign exchange, international payments or cross-border transfers, by requiring that VASPs and other licence institutions that deal with stablecoins to also obtain an authorisation from the Central Bank to operate in the exchange market. The tax treatment of stablecoins is also evolving. At present, and unlike traditional fiat currency exchange operations, stablecoin transactions are not generally
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