Brazil Cracks Down on Self-Custody Wallets and Unregulated Crypto Providers

The Central Bank of Brazil has issued two new resolutions aimed at strengthening oversight of self-custody wallets and virtual asset service providers (VASPs). Resolution 588 requires VASPs to report operations involving transfers of virtual assets valued at $10,000 or more from self-custodial portfolios. This data will be submitted to the national money laundering watchdog, the Council for Financial Activities Control (COAF), which may create a database mapping private holdings.

The resolutions also ban operations with unauthorized crypto providers, closing the Brazilian market to unregulated parties. Only 5 VASPs have applied for authorization to operate in Brazil, hinting at major consolidation in the country's crypto industry.

The new measures are set to take effect on October 1, 2026, when the deadline for VASPs to obtain authorization expires. The increased compliance burden and capital requirements have already affected operations, with many VASPs struggling to meet the new standards.