Brazil’s tax authority is set to increase oversight of foreign cryptocurrency exchanges operating within the country. This week, the tax revenue service will publish an ordinance requiring these exchanges to provide detailed information about their operations and compliance with local regulations.
Representations of cryptocurrencies plunging into water, as captured by Reuters/Dado Ruvic, symbolize the volatile and often opaque nature of digital currencies. The tax revenue service’s new ordinance aims to bring greater transparency to this sector by demanding that foreign platforms such as Binance, Coinbase, OKX, and KuCoin disclose their operational frameworks and partnerships with local service providers.
Andrea Chaves, deputy secretary of inspection at the federal revenue service, highlighted the need for this measure: “We need to understand how these exchanges operate in Brazil and ensure there are no illegal activities. Additionally, it’s crucial to have accurate information on Brazilian wealth subject to taxation.”
Wagner Lima, risk management coordinator at the revenue service, noted the importance of compliance with the 2019 regulation, which mandates that exchanges provide relevant information to the tax authorities. This move aims to align the reporting requirements of foreign entities with those of domestically based exchanges, enhancing oversight and reducing the risks associated with unregulated financial activities.
This regulatory effort comes amid a significant increase in crypto asset declarations in Brazil, Latin America’s largest economy. From January to July 2023, Brazilians declared 133.6 billion reais ($24.6 billion) in crypto assets, a 36.6% rise from the same period the previous year. Of this total, 14.5 billion reais were declared through foreign exchanges, reflecting a 51.2% year-over-year increase. This trend underscores the importance of obtaining comprehensive data to ensure proper taxation and regulatory compliance.
As Brazil’s tax authority steps up its efforts to regulate the crypto market, the forthcoming ordinance marks a crucial step towards greater transparency and control over foreign cryptocurrency exchanges operating within the country.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
20th June, 2024
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