Brazil’s Special Department of Federal Revenue will begin collecting information from foreign crypto exchanges to ensure their operations are in compliance with local regulations, Reuters reported on June 18.
The tax department will ask foreign crypto exchanges how they interact with local service providers and ensure the companies provide details required by regulations introduced in 2019.
Deputy Secretary of Inspection Andrea Chaves said:
“It’s an area of concern for us to understand first how [the foreign exchanges] operate here, whether there’s any illegality or not.”
Chavez said that the tax department will also collect information about Brazilian wealth that should be subject to taxes.
The tax department is expected to release an ordinance summoning foreign exchanges before the end of the week. Unlike local Brazilian exchanges, foreign companies do not need to report transactions.
Reuters identified Binance, Coinbase, OKX, and KuCoin as foreign exchanges operating in the country, though the list is non-exhaustive.
Brazil’s rising crypto activity
According to tax department data cited by Reuters, individuals and legal entities have reported higher crypto amounts for the past year amid rising activity in the country.
Tax reporters declared 133.6 billion reals ($24.6 billion) of crypto during the first half of 2023, including 14.5 billion reals ($2.7 billion) on foreign exchanges. The numbers represent 36.6% and 51.2% growth in each category compared to the first half of 2022.
Brazil’s tax department intends to release updated data through a technological update.
More recent third-party data also indicates growth. In a May research report, Kaiko Research found that crypto trading volume involving the Brazilian real reached $6 billion between January and early May 2024.
The $6 billion volume represents 30% growth from the previous year and outpaces US dollar trading volumes. Kaiko’s recent data also indicates that Brazil is the largest crypto market in Latin America and the seventh-largest fiat currency market globally.