The year 2025 is expected to bring several regulatory developments regarding foreign investments in Brazil and Brazilian capital abroad, especially with respect to virtual assets. Learn about the main proposals of the Banco Central do Brasil to regulate virtual asset service providers (VASPs)!
Establishment and Operation of VASPs
The regulation of the establishment and operation of virtual asset service providers, known as “VASPs” (“virtual asset service providers”), is expected to take place this year. Public Consultation Notices (Editais de Consulta Pública – ECPs No. 109 and 110/2024) remain open until February 7, 2025. The draft regulations also address the provision of virtual asset services by institutions already authorized by BACEN to operate.
Types of VASP Authorization
Three types of VASPs are proposed, each with different scopes of activity, capital requirements, and regulatory obligations:
- Virtual asset intermediary: intermediation of transactions; minimum share capital and net equity of BRL 1 million, or BRL 3 million if conducting staking or offering margin accounts;
- Virtual asset custodian: custody of virtual assets; minimum share capital and net equity of BRL 2 million; and
- Virtual asset broker: combination of intermediation and custody; minimum share capital and net equity of BRL 3 million, or BRL 5 million if conducting staking or offering margin accounts.
VASPs already operating prior to the entry into force of the rules under consultation may continue operating, provided they apply for authorization by a deadline to be set by BACEN in 2025.
VASPs and the Foreign Exchange Market
The regulation of VASP activities is also expected this year. Public Consultation Notice (ECP No. 111/2024) remains open until February 28, 2025, regarding a proposed resolution to include VASP activities or transactions in the foreign exchange market and to define the circumstances in which VASPs must comply with regulations on Brazilian capital abroad and foreign capital in Brazil.
Key Points of the Proposed Resolution under ECP No. 111/2024
According to the draft resolution, VASPs may provide the following services, provided they are duly authorized by BACEN and transactions are limited to USD 100,000:
- international payments or transfers involving the transmission of virtual assets;
- purchase, sale, exchange, or custody of virtual assets denominated in Brazilian reais owned by non-residents; and
- purchase, sale, exchange, transfer, or custody of virtual assets denominated in foreign currency.
Securities brokerage firms, securities distribution companies, foreign exchange brokerage firms, credit, financing, and investment companies, and development agencies may carry out international payments or transfers using virtual assets, limited to the equivalent of USD 500,000.
VASPs and Transition to Compliance with Potential New Foreign Exchange Regulations
The proposed resolution also requires VASPs to provide information to BACEN regarding such activities, including: (i) identification of clients and counterparties (when applicable); (ii) classification of the transaction; and (iii) amounts and types of virtual assets involved, among other information.
If approved, VASPs already operating in the Brazilian market will need to apply for authorization to operate in the foreign exchange market simultaneously with their application for operating authorization.
BACEN’s Intended Regulation of VASPs in the Foreign Exchange Market and Limitations on Stablecoins
The draft resolution under public consultation prohibits the transfer of cryptocurrencies pegged to fiat currencies (“stablecoins”), such as the euro or the U.S. dollar, to self-custody wallets.
In such cases, BACEN intends to allow stablecoin transfers only:
- between residents, with payment stipulated in foreign currency in accordance with applicable Brazilian legislation at the time of transfer;
- between institutions authorized to operate in the foreign exchange market; and
- between two or more VASPs involving stablecoins owned by the same client.
VASPs must ensure that these virtual asset transactions are carried out by clients on their own behalf, and clients are prohibited from operating on behalf of third parties.