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The State of Bitcoin in Brazil

Bitcoin is extremely popular in Brazil. In fact, the number of Bitcoin investors in the South American nation had surpassed those investing in the stock market in January 2018. That wasn’t surprising as Bitcoin trading volume was as high as $846 million in December 2017 thanks to the rapid rise in the value of the cryptocurrency.

But despite the massive popularity of Bitcoin in the country, the Brazilian government didn’t interfere much in the cryptocurrency ecosystem and didn’t introduce a regulatory framework, until recently. Brazil’s tax regulatory authority, the Department of Federal Revenue of Brazil (RFB), published its draft regulations on cryptocurrency taxation in November last year. Let’s see what they mean for the country’s Bitcoin scenario.

The Regulatory Environment

According to the RFB’s draft report, Brazilian cryptocurrency exchanges will now have to send a detailed overview of their crypto operations every month, including the transaction amounts and customer identities. At the same time, those individuals and firms who are residents of Brazil will have to report those transactions that are conducted with foreign cryptocurrency exchanges in excess of $2,700 per month (or 10,000 Brazilian reals).

Moreover, those investors who fail to report their transactions will be fined. Additionally, those delaying a tax declaration will end up paying a $400 (or 1,500 Brazilian reals) fine, with the potential for an addition fine of 3% of the transaction value if insufficient information has been provided.

Now, Brazil taxes the purchase and sale of cryptocurrencies such as Bitcoin as goods, and they are subject to income tax at rates between 15% and 22% based on the gains. But beyond this, there isn’t much clarity about the legal status of Bitcoin in Brazil, which is proving to be a hindrance for cryptocurrency exchanges.

In fact, a study in mid-2018 revealed that 88% of Brazilian cryptocurrency exchanges are in favor of regulations. That’s not surprising as the lack of regulation and clarity about the status of Bitcoin has created a rift between cryptocurrency exchanges and banks in Brazil. A clutch of major Brazilian banks were under investigation by the country’s Administrative Council for Economic Defense (CADE) last year as they had reportedly shut down accounts belonging to cryptocurrency traders as well as brokerages.

The banks, however, have denied of a move to prohibit market access for cryptocurrency brokerages, instead claiming that the accounts were shut down due to the absence of certain information related to anti-money laundering (AML). This makes it clear why the government needs to step in and create a favorable regulatory environment for Bitcoin innovation given the massive adoption of the cryptocurrency in Brazil.

In fact, the largest investment bank in Brazil, Banco BTG Pactual, has announced that it will be entering the cryptocurrency ecosystem with a digital token of its own. However, other smaller crypto start-ups will need the assistance of the country’s national banking structure in order to thrive; otherwise the unregulated nature of the Bitcoin market in the country will hurt adoption.

Buying and Selling Bitcoin in Brazil

There are several exchanges from where investors can buy Bitcoin in Brazil. Ideally, you need to choose an exchange based on your requirements, sign-up for the same, verify your identity, and then buy Bitcoin. However, the exchanges differ from one another based on several factors such as transaction fees, ease of use, withdrawal limits, payment modes, reputation, and security.

That’s where our guide to Bitcoin Exchanges in Brazil comes in handy as it lists the pros and cons of the major cryptocurrency exchanges in the country. But it should be kept in mind that some of the exchanges require users to first get a Bitcoin or cryptocurrency wallet first where the tokens will be stored. If you don't have a wallet, you can go through our guide on the best Bitcoin & cryptocurrency wallets to choose one.

Once you have a wallet and have signed up with an exchange, you are all set to buy Bitcoin. Alternatively, if you are in Sao Paulo, you can buy Bitcoin through one of the two ATMs present in the city. The advantage of a Bitcoin ATM is that you can buy tokens using cash, the purchase is instant, and you will also remain anonymous as most ATMs don’t require verification. The downside comes in the form of high transaction fees that range between 5%-10%.

Meanwhile, the avenues to spend Bitcoin in Brazil are also expanding. A movie theater in the city of Florianopolis recently started accepting payments in Bitcoin, while a hotel chain in the country was forced to start accepting Bitcoin payments after multiple requests. Additionally, Brazilian Supermarket Oasis Supermercados Chain is also accepting Bitcoin payments now.

So, it is evident that the Bitcoin ecosystem in Brazil is developing, but the government needs to take a stand and ensure that it keeps moving in the right direction.