Massacre announced on the Brazilian crypto market

Massacre announced on the Brazilian crypto market. Since February 2, Brazil's central bank has subjected digital asset platforms to capital and compliance requirements modeled on those of banking institutions. Of the nearly 300 providers identified in the country, only around twenty would be strong enough to hope for a license, and around ten could obtain it.

In Brazil, the acronym PSAV designates virtual asset service providers, cousins ​​of French PSAN and VASP in international terminology. The resolutions adopted by Banco Central do Brasil divide the profession into three categories: intermediation, custody of assets on behalf of third parties and brokerage. Each box calls for its capital floor, and the largest profiles must display up to 37.2 million reais, or approximately $7.2 million.

Capital is only the first step. The specifications also impose formalized governance, an anti-money laundering system, segregation of customer assets and periodic reporting to the supervisor. For a mid-sized platform living on commissions of a few basis points, the cost of compliance often exceeds the annual margin.

The calendar finally tightens the noose. Applicants must submit their application before October 30, otherwise they will have 30 days to cease all activity and return their users' funds.

Four platforms have announced the cessation or restructuring of their services intended for individuals: Bitnuvem, NovaDAX, Digitra and Coinext. None named the new regulations in their press releases, and all chose to communicate in the weeks following its entry into force.

The arithmetic is brutal: from 300 players to 20 or 25 files deemed admissible, then to a handful of effective approvals, more than 95% of the market would leave the legal framework through sale, merger or closure. Houses capable of securing eight figures of equity and a robust compliance department are starting with a head start, like Mercado Bitcoin, Foxbit or the local subsidiaries of international groups. The small structures born from the euphoria of 2021 have neither the balance sheet nor the time to catch up with this level of requirements.

The most serious aspect concerns dollar-backed stablecoins. Transactions involving tokens referenced to a foreign currency fall under the foreign exchange market regime, with the accompanying reporting and identification obligations. The central bank estimates the share of Brazilian crypto flows linked to these assets at around 90%, a percentage that transforms a technical rule into structural reform for the entire country.

There remains the question of users deprived of a local platform. They maintain access to foreign exchanges, DeFi protocols and self-custody, beyond the reach of the Brazilian consumer protection supervisor. The tax authorities have already anticipated the movement: their reporting obligations now cover transactions carried out on foreign platforms such as those carried out from a personal wallet.