- Brazilian tax authority implemented rules that forced multiple crypto exchanges to close down shop.
- The rules make it exceedingly difficult for smaller exchanges to survive, as the cost of compliance is too high.
- Brazil also has three crypto bills on its way, although they appear to be stuck in the National Congress for the time being.
As crypto adoption continues to spread, and people from all nations across the world are using digital currencies, a lot of countries have moved to create tax rules even before drawing regulatory frameworks for the new asset class. Brazil is one such country, and its tax regulations were already implemented even before the dedicated legislation was officially adopted.
Now, the new tax rules had hit not only its crypto users but also businesses such as crypto exchanges. Two trading platforms — Latoex and Acesso Bitcoin — have recently had to shut down due to such rules, as digital asset brokers failed to comply with the requirements.
As a consequence of not respecting the new reporting requirements, the exchanges faced fines, while the strict rules continue to hurt numerous platforms, especially those with low trading volume.
Compliance cost is too high for smaller exchanges
Acesso Bitcoin pointed out that the new situation has damaged trading volumes even more, and the market rapidly cooled off for small exchanges. The exchange decided that a shutdown is the only remaining option, which is why it advised its clients on how to withdraw their funds, whether in cryptocurrency or in Brazillian real (BRL).
Latoex, previously known as E-juno, admitted that it had difficulty meeting the new requirements, as dictated by the tax authority. The CEO of the exchange’s investment arm, Diego Velasques, confirmed that the company would shut down less than a week ago. At the moment, Latoex is trying to sell its assets and use the funds to pay back its clients. Meanwhile, the company is also trying to reverse the Brazillian regulator’s suspension order, simply to avoid a fine of 100,000 BRL ($23,000).
As mentioned, Brazil has yet to actually adopt the legislation created to regulate the crypto space. However, with no dedicated law, any interaction with the crypto industry is governed mostly by Normative Instruction 1888.
The instruction claims that all transactions that go through crypto exchanges must be reported to the Instruction’s issuer, the RFB (Secretaria da Receita Federal do Brasil) — the country’s Department of Federal Revenue. The amount of the transaction is of no concern, and any institution that fails to comply or presents inaccurate data will be fined.