Brazil demands overseas exchanges to provide user information: to prevent illegal activities and tax evasion

Reuters reported that Brazil's tax authority plans to summon foreign cryptocurrency exchanges to explain their business operations and partnerships with local service providers. This move aims to prevent potential illegal activities, gather financial information about local users, and enforce the "Overseas Investment Income Tax" passed last year.

Brazil Plans to Require Overseas Exchanges to Submit Financial Information of Local Users

According to the Brazilian government, the Federal Revenue Service is expected to issue a decree this week and will start calling overseas exchanges that provide cryptocurrency trading services in Brazil to understand their operations in the country and verify if their citizens are complying with the new tax laws.

Andrea Chaves, Deputy Chief of Surveillance at the Federal Revenue Service, emphasized:

Our main focus is on how exchanges operate in Brazil to clarify if there are any illegal activities.

On the other hand, Wagner Lima, Minister of Risk Management at the Revenue Service, stated:

We also want to understand the details of cooperation between these exchanges and domestic service providers and seek to obtain financial and tax information of Brazilian citizens.

Currently, only local cryptocurrency exchanges are obligated to report transactions, but it is expected to soon expand to offshore exchanges.

A previous report by Kaiko Research showed that the main overseas exchanges operating in Brazil with Portuguese language websites targeting local users are:

• Binance
• OKX
• Coinbase
• KuCoin

Currently, although Binance remains the largest exchange in Brazil, its market share has decreased from 95% two years ago to 79%, gradually being replaced by the local Mercado Bitcoin and Mexico's Bitso.

Brazil's Cryptocurrency Craze Elevates It to the Seventh Largest Market Globally This Year

Kaiko Research: Surge in Cryptocurrency Trading Volume in Brazil

Reports indicate that cryptocurrency trading volume in Brazil denominated in BRL has increased by 30% compared to the same period last year:

So far, in terms of fiat trading volume, the country has become the largest cryptocurrency market in Latin America and the seventh largest globally.

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At the same time, stablecoins are popular in the Brazilian market, accounting for slightly over 50% of the volume, surpassing Bitcoin and Ether which make up about 45%.

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Increase in Declaration of Cryptocurrency Assets

Furthermore, according to data from the local tax authority, Brazilian citizens declared cryptocurrency assets worth 133.6 billion BRL, approximately 24 billion USD in the first half of last year, showing a 36.6% increase compared to the same period last year.

Of this amount, 14.5 billion BRL, around 2.61 billion USD, was reported through overseas exchanges, marking a 51.2% growth, indicating the government's strong efforts to enforce tax compliance.

Authorities Strengthen Tax Collection Efforts

In response to this trend, Brazilian authorities passed a tax bill in December last year, imposing a 15% income tax on profits and interest earned by Brazilians on cryptocurrency exchanges abroad.

Effective as of New Year's Day, Brazil will tax overseas investment earnings at 15%, including offshore cryptocurrency platforms.