Brazil’s legal framework for cryptoassets and upcoming regulation

Monique Mavignier 
BMA Advogados, São Paulo
monique@bmalaw.com.br

Felipe Palhares
BMA Advogados, São Paulo
felipe.palhares@bmalaw.com.br

Henrique Garcia Pimenta
BMA Advogados, São Paulo
hgp@bmalaw.com.br

Daniel Falcão de Paula Soares
BMA Advogados, Rio de Janeiro
dfp@bmalaw.com.br

Mila Cunha
BMA Advogados, Rio de Janeiro
mifc@bmalaw.com.br

After more than six years of discussions in the Brazilian National Congress (Congresso Nacional), on 21 December 2022, Brazil enacted its first cryptoassets law, Law No 14.478/2022 (otherwise known as the Brazilian Virtual Assets Law or BVAL), which sets forth guidelines for the provision of virtual assets services and regulates virtual assets service providers (VASPs). The BVAL became effective on 20 June 2023 and the accompanying regulation is expected to be published soon, following three months of public consultations, which ended in February 2025.

The BVAL

The law defines a virtual asset as a ‘digital representation of value that can be traded or transferred by electronic means and used for payments or investment purposes’, not including: (1) fiduciary currency (whether national or foreign); (2) electronic currency, as defined under Law No 12,865/2013 (ie, electronically stored funds); (3) instruments conferring on their holders access to specific products or services, or to benefits arising from those products or services, such as points and rewards from loyalty programmes; and (4) representations of assets whose issuance, bookkeeping, trading or liquidation is provided for in relevant laws or regulations, such as relating to securities, which are subject to the Brazilian Securities Law (Law No 6,385/1976), and financial assets.

Under the BVAL, VASPs are defined as any legal entity that performs at least one of the following virtual assets services: (1) exchange between virtual assets and national or foreign currency; (2) exchange between one or more virtual assets; (3) transfers of virtual assets; (4) custody or administration of virtual assets or instruments that provide control over them; or (5) participation in financial services and the provision of services related to the offer by an issuer or the sale of virtual assets.

The BVAL also amended Law No 9,613/1998 to include VASPs among the entities subject to the anti-money laundering (AML) control mechanisms, requesting that VASPs comply with the know-your-client (KYC) procedures, and register with and report on the relevant transactions to the Brazilian Council for Financial Activities Control (Conselho de Controle de Atividades Financeiras or COAF), among other ancillary obligations.

On 13 June 2023, Decree No 11,563/2023 granted authority to the Brazilian Central Bank (Banco Central do Brasil or BCB) to: (1) regulate the provision of virtual asset services; (2) regulate, authorise and supervise VASPs; and (3) deliberate on other matters covered by the BVAL.

Accordingly, in November 2024, the BCB published three public consultations (PCs), which detailed the proposals related to three BCB resolutions, namely concerning (1) the virtual assets subject to regulation, incorporation and the operation of VASPs (PC No 109); (2) the authorisation requirements for VASPs (PC No 110); and (3) the activities and operations of VASPs in regard to the foreign exchange market (PC No 111).

PC No 109

PC No 109 delimitated the virtual assets subject to the BCB regulations to those expressly specified in the BVAL, which does not include: (1) non-fungible tokens; (2) financial instruments subject to tokenisation processes, such as financial assets and securities; and (3) movable or immovable property subject to tokenisation processes, even if designed for investment purposes.

In addition, the consultation stated that VASPs are the institutions authorised by the BCB to perform, on their own or on behalf of third parties, virtual asset services that fall into at least one of the following types: (1) the intermediaries of virtual assets, which comprises, among other activities, intermediation in regard to the distribution of virtual assets, subscription of virtual asset issuances, the purchase, sale and exchange of virtual assets (on its own or on behalf of third parties), virtual assets portfolio management, staking and margin account transactions; (2) the custodians of virtual assets, comprising the custody and control of virtual assets, the provision of a description of the position on virtual assets, compliance with transfer instructions, the treatment of events relating to the virtual assets and constitution and extinction of liens and encumbrances; and (3) the brokers of virtual assets, which have as their corporate purpose to carry out the combination of activities performed by intermediaries and custodians of virtual assets.

VASPs must permanently observe the following minimum limits in terms of their paid-in share capital and net equity: (1) R$1m, if the company operates exclusively as an intermediary of virtual assets; (2) R$2m, if the company operates exclusively as a custodian of virtual assets; and (3) R$3m, if the company operates as a broker of virtual assets. Intermediaries and brokers of virtual assets offering margin account and staking transactions to its clients should add an extra R$2m to the amounts provided above.

VASPs that started their business activities before the relevant BCB resolution becomes effective may continue to provide virtual asset services until the completion of the authorisation process, provided that it does not expand its activities until the deadline to be informed by the BCB in regard to its authorisation request has passed.

PC No 109 also presents general good practices and internal controls to be adopted by VASPs during the provision of their services to the public, including the segregation of assets in terms of company and client assets, rules for hiring essential services, governance measures to be adopted while providing virtual assets services, and security measures and procedures.

PC No 110

PC No 110 was intended to standardise the authorisation requirements for VASPs according to the authorisation requirements that the BCB demands from traditional financial institutions. In this regard, VASPs seeking authorisation from the BCB should provide information on the following aspects: (1) the economic and financial capacity of the controlling shareholders, individually or jointly, ensuring that such capacity is compatible with the capital necessary for the structuring and operation of the institution, as well as contingencies arising from market dynamics; (2) the lawful origin of the funds used in the payment of the capital stock or acquisition of control; (3) the economic and financial capability in terms of the project; (4) the compatibility of the IT infrastructure with the complexity and risks inherent to the business; (5) the compatibility of the corporate governance structure with the complexity and risks inherent to the business; (6) proof of the unblemished reputation of the administrators, controlling shareholders and holders of qualified participation, in the case of natural persons; (7) proof of the knowledge, by the management, of the services to be rendered and the segment in which the institution intends to operate, market dynamics, sources of operational resources and the management of the business activities and associated risks; (8) the technical qualifications of the administrators, compatible with the acts to be performed during their time in office; and (9) compliance with the minimum capital and net worth requirements provided in the regulations.

Acts involving (1) the development of new virtual assets activities; (2) a change of control; (3) an amalgamation, spin-off or merger; (4) a change of the corporate type; (5) a management appointment; (6) a change in the capital stock amount; or (7) a change of the corporate name, will also require the BCB’s prior approval.

The authorisation process for VASPs that have never carried out business activities in Brazil is expected to take up to 360 days.

PC No 111

PC No 111 was focused on the activities or operations of VASPs in regard to the foreign exchange market and provided details on the circumstances in which VASPs will be subject to the regulations dealing with Brazilian capital abroad and foreign capital in the country.

The proposed resolution defines VASPs’ activities in regard to the foreign exchange market as including international payments and transfers through the transmission of virtual assets;  the purchase, sale, exchange or custody of virtual assets denominated in reais owned by non-residents; and transactions with virtual assets denominated in a foreign currency. The consultation also establishes rules for the provision of such activities in regard to the foreign exchange market; determines that only VASPs authorised to operate in the foreign exchange market may carry out the aforementioned activities in the foreign exchange market and defines which institutions may perform this role; and details the requirements in regard to the provision of information to the BCB regarding such activities, which includes the need to identify the client and counterparties (when applicable), classify the transaction and provide information on the amounts and type of virtual assets involved.

The proposed resolution also provides that a payment or international transfer through the transmission of virtual assets carried out by a VASP is limited to an amount equivalent to US$100,000.

Conclusion

Brazil’s journey towards a comprehensive regulatory framework for virtual assets has progressed significantly since the enactment of the BVAL and the subsequent designation of the BCB as the responsible regulatory body through Decree No 11,563/2023.

The BCB’s proactive approach involving multiple public consultations and a continuous and open channel of communication with the market and relevant players demonstrates the commitment of the BCB to innovation and the alignment of the country with international standards.

The crypto market in Brazil currently awaits the unveiling of the final regulations from the BCB, which are expected to provide much-needed clarity, legal certainty and a robust framework for the operation of the VASPs in Brazil, ultimately aiming to protect investors, foster market integrity and ensure the country’s commitment to innovation.