Brazil?s Central Bank Sets Crypto Rules, Establishes up to $7M Capital Bar for Firms

Brazil?s central bank issued its most sweeping crypto regulations to date, creating a formal licensing regime for service providers and classifying a broad range of crypto activities as subject to foreign exchange and capital market rules.

The framework introduces three resolutions that define how crypto businesses must operate in South America?s largest economy, how much capital they must hold, and how international crypto transactions will be treated under law. The rules take effect Feb. 2 and existing companies have nine months from then to comply.

The regime marks Banco Central do Brasil's most comprehensive attempt yet to govern its fast-growing, but largely unregulated, crypto sector. While the central bank has floated various proposals since 2019, progress has been halting due to institutional friction and industry resistance.

The challenge ?was finding a way to unite innovation and security,? Gilneu Vivan, the bank's director of regulation, said at a press conference, according to local news outlet Portal do Bitcoin. ?The crypto market depends heavily on technology and has very important obligations related to anti-money laundering. All of this requires guarantees that it will be well executed.?

Some of the banks' regulations, including capital requirements and timescale came under attack from the crypto industry.

Capital levels surprise

Companies in the industry will need to hold a minimum of 10.8 million reais ($2 million) in capital, the bank said. Depending on the type of business, some companies will need to hold at least 37.2 million reais. That's well above the 1 million-3 million reais proposed during the public consultation phase.

Bernardo Srur, president of the Brazilian Association of Cryptoeconomy (ABCripto), called the framework ?positive and necessary,? but criticized both the capital bar? and the short window for achieving compliance which, he said, could deter competition.

Firms that fail to meet the compliance deadline, which includes proving capital levels, cybersecurity controls, customer due diligence practices and risk assessments, will be barred from operating. Foreign companies active in the country must establish a local entity and transfer operations under that structure.

The rules establish a new type of business entity: Sociedades Prestadoras de Servi?os de Ativos Virtuais (SPSAVs), or Virtual Asset Service Providers (VASPs), which must now be licensed by the central bank and are divided into three categories based on the services they offer: intermediaries, custodians and brokerages.

FX controls hit self-custody wallets

The framework also brings several types of crypto transactions, including those involving stablecoins, within Brazil?s foreign exchange and cross-border capital controls regime. These include international payments with cryptocurrencies, transfers to and from self-custody wallets and crypto-to-fiat transactions.

Firms authorized to operate in Brazil?s FX markets, including VASPs, may conduct these transactions, but with restrictions that include a cap of $100,000 per transaction. Starting May 4, they will have to report these transactions monthly to the central bank with details including client details, asset types, amounts in reais and links between counterparties.

VASPs are also barred from handling physical currency (domestic or foreign) and from using foreign cash in crypto purchases.

The goal, officials say, is to reduce regulatory arbitrage and bring transparency to crypto's role in Brazil?s balance of payments and economic statistics.