Brazil intensifies the crackdown on Money Laundering! Central Bank tightens regulations on virtual assets and Crypto Assets.

According to a report by Reuters, the central bank of the largest economy in Latin America officially announced new regulatory rules for virtual asset (including Crypto Assets) transactions on Monday. The new regulations will extend the existing system aimed at Money Laundering and Combating the Financing of Terrorism to Virtual Asset Service Providers (VASPs), strictly regulating international payments and transfers of virtual assets.

Overview of Brazil's New Regulations

According to the announcement on the central bank's website, the new regulations will take effect in February next year. At that time, all services provided by foreign exchange and securities brokers, distributors, and virtual asset trading platforms must go through an authorization process. Specifically:

Any purchase, sale, or exchange of virtual assets (such as stablecoins) that are pegged to fiat currency will be regarded as foreign exchange transactions.

Using virtual assets for international payments or transfers (including settling debts through bank cards or other electronic payment methods) also falls under this category.

Virtual asset service providers must comply with customer protection, information transparency, anti-money laundering (AML), and Combating the Financing of Terrorism (CFT) regulations.

The new regulatory framework also includes governance and security requirements, internal control mechanisms, reporting obligations, and other compliance responsibilities.

Regulatory chief Gilmour Van pointed out at a press conference that the new regulations will reduce opportunities for fraud, deception, and money laundering using the virtual asset market.

Regulatory Framework Background

As early as 2022, the Brazilian Congress passed a legal framework for Crypto Assets, laying the foundation for the legal status of virtual assets. However, the implementation of this law depends on the central bank developing subsequent regulatory measures. During this period, the central bank held at least four public consultations to gather opinions from the market and industry in preparation for the new regulations.

In addition, the use of stablecoins is rapidly rising in Brazil. Central Bank President Gabriel Galipolo has publicly stated that the increase in the circulation of unstable currencies or stablecoins related to illegal activities is concerning. Policymakers have pointed out that compared to highly volatile crypto assets like Bitcoin, stablecoins are less volatile and are more commonly used for payments, with many users hoping to bypass traditional payment systems that are more tightly regulated and have higher tax burdens.

The Significance and Challenges of New Regulations

This regulatory reform has significant implications for Brazil's virtual asset ecosystem and financial regulatory system. Firstly, by bringing virtual asset transactions under the scope of foreign exchange regulation, the central bank has clarified its financial regulatory authority and strengthened the framework for combating money laundering and Combating the Financing of Terrorism. Secondly, this move positively promotes investor protection, transaction transparency, and market confidence.

However, this policy also faces numerous challenges. Regulatory authorities will have to strengthen their supervisory capabilities, conducting licensing reviews and ongoing supervision of trading platforms, brokers, and distributors. Additionally, for the industry, the new regulations mean that entry barriers, internal controls, and compliance costs will increase, potentially putting pressure on small platforms. On the other hand, for traders or service users, treating virtual asset exchanges as foreign exchange transactions may bring new compliance obligations, reporting duties, and regulatory oversight, increasing the complexity of trading processes. Currently, the market generally views this regulatory advancement positively, as a standardized regulatory environment often helps attract institutional funds and enhances market trust. However, there are also voices within the industry warning that small platforms or startups may face compliance pressures and rising costs. Many practitioners and observers are also concerned that if regulations are too strict or procedures too cumbersome, it could lead to weakened innovation, capital outflow, or a shift to overseas markets.

This article discusses Brazil's intensified crackdown on Money Laundering! The central bank tightens the regulatory rules for virtual assets and Crypto Assets, first appearing in Chain News ABMedia.