Brazil's Congress moves to levy higher taxes on cryptocurrencies

Brazilian lawmakers are moving forward with a legislation that would raise taxes on cryptocurrencies held overseas. According to local reports, a congressional committee has approved amendments to a bill that recognizes cryptocurrencies as "financial assets" for tax purposes in foreign investments.

In addition, the draft bill taxes gains from fluctuations in crypto asset prices against Brazil's fiat currency, as well as foreign exchange rate fluctuations. According to congressman Merlong Solano, the revision seeks to promote equal tax treatment since crypto investments abroad currently receive lower tax breaks.

Overseas earnings up to 6,000 Brazilian reais (~$1,200) will be exempt from taxation under the new rules. Earnings between 6,000 and 50,000 (~$10,000) are subject to a 15% tax rate. Above this threshold, taxes will be applied at 22.5%.

According to the legislation, changes will only apply to cryptocurrency exchanges without offices in Brazil. The new rules could make local exchanges a less costly option for some investors, in particular those with gains above the top tax bracket, legal experts said. Also, the law could boost crypto exchange activity on the national level and attract foreign players to establish offices in the country.

A number of global crypto exchanges operate in the country, including Binance, Coinbase, Bitso, and Crypto.com, as well as local players such as Mercado Bitcoin and Foxbit.

Brazil's Congress will vote on the bill on Aug. 28. If approved, the new taxation will take effect in January 2024.

Recent months have seen a rapid development of crypto-related activities in Brazil. The country's central bank recently announced a rebranding of its central bank digital currency (CBDC), now called Drex. As part of the launch of Drex, the central bank plans to introduce a tokenization system aimed at expanding business access to capital.

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