Brazil's cryptocurrency exchanges close due to tightening tax regulation

Brazilian cryptocurrency exchanges Acesso Bitcoin and Latoex announced their closure due to new taxrules that began to apply even before formal legislative approval.

So, digital asset brokers who don't complynew reporting requirements are subject to fines, and strict rules are detrimental to smaller platforms that close due to declining trade volumes. One of the affected exchanges, Acesso Bitcoin, said the current situation created by the new rules was the main reason for its decision to stop working.

“After the Federal Tax Service introduced these rules, we noticed a significant decrease in trading volume,” said Pedro Nunes, co-founder of the exchange.

Acesso Bitcoin recently started advisingcustomers on how to proceed with the withdrawal of funds. Any users storing BTC on the exchange must transfer the coins to a private wallet or to another exchange. Customers with balances in Brazilian reals can withdraw money at any time in accordance with the terms and conditions that apply to the normal operation of the platform.

Brazil's Latoex exchange also closes due todifficulties associated with the new requirements of the tax authority of the country. Last week, the closure was confirmed by Diego Velasques, CEO of Latoex Capital, the investment division of the exchange, which separated in December from the cryptocurrency trading platform.

Latoex plans to sell its assets to otherscompanies and return the remaining funds to customers. The asset manager is also trying to reverse the suspension order issued by the Brazilian Securities and Exchange Commission. The regulator threatened a group of companies to impose a fine of 100,000 Brazilian reais ($ 23,000) in case of non-enforcement of the decision.

Brazil Cryptocurrency Bills

Brazil has yet to formally pass laws,designed to regulate the cryptocurrency industry. In the absence of specific legislation, industry interactions are now largely regulated by Regulatory Instruction 1888 issued by the Department of Federal Revenue (RFB).

According to this instruction, information about alltransactions carried out through Brazilian cryptocurrency exchanges must be transmitted to the RFB. Brokers and companies that provide inaccurate information are subject to a fine of approximately $350. But even without penalties, compliance requires additional investment as the entire sector tries to adapt to new rules. Additionally, last August, the Brazilian Tax Authority required citizens to report cryptocurrency transactions.

In both houses of the National Congress of the countryNumerous proposals have been submitted for the comprehensive regulation of the cryptocurrency industry and its transfer to the control of the Central Bank of Brazil. So far, the main bill in this area remains 2303/2015, which was introduced to the Chamber of Deputies almost five years ago, archived in 2018, and then again included in the agenda in March 2019. Then a special commission was appointed to analyze it and make changes.

Two other bills, PL 3825/2019 and PL3949/2019, are currently pending in the Senate. Both are aimed at establishing common rules for the cryptocurrency market, with particular emphasis on implementing rules for digital asset brokers and investor protection measures. However, no specific deadlines have been set for the adoption of any of these laws, which are still under discussion.

Let us recall that last year the Central BankBrazil has moved to classify purchased or sold crypto assets in accordance with International Monetary Fund (IMF) recommendations. Additionally, in December, Brazil's Federal Revenue Department updated its tax code. The new edition provides for fines for traders who do not declare income from cryptocurrency transactions.

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