Brazil has signaled a potential reversal of a tax regulation closely affecting the cryptocurrency market. According to Reuters, the country’s new finance minister, Dario Durigan, is preparing to postpone the public consultation process regarding a plan to impose taxes on certain cryptocurrency transactions.
The regulation in question stipulated that certain crypto transactions should be classified as currency transactions and, as such, subject to the “Imposto sobre Operações Financeiras (IOF)” tax.
In Brazil, the Inbound Freight Forward (IOF) rates applied to foreign exchange transactions can range from 0.38% to 3.5%, depending on the type of transaction. Foreign spending, money transfers, and certain investment transactions are taxed at higher rates.
Durigan, who took office on March 20, is said to have adopted a more cautious economic approach following the resignation of his predecessor, Fernando Haddad. According to the report, the new minister plans to focus on microeconomic policies, avoiding legislation that could create tension with Congress due to the election year.
The proposed draft was expanded to include stablecoin transactions in particular. However, industry representatives reacted strongly against this initiative. Organizations such as ABcripto, ABFintechs, Abracam, ABToken, and Zetta argued that classifying stablecoins as currency violates the constitution and the Virtual Assets Act of 2022.
Experts say that the postponement of the regulation could have a positive impact on the crypto market in the short term, but uncertainty regarding tax policies persists. It is also suggested that the government may abandon its plan to eliminate tax advantages for certain investment instruments.
*This is not investment advice.