Brazil's Strict Crypto Rules Force Exchanges to Exit Market
The Central Bank of Brazil's new crypto regulatory framework is leading to a consolidation of the country's cryptocurrency industry, with many exchanges terminating operations and exiting the market. According to local sources, only five virtual asset service providers (VASPs) have submitted authorization requests to operate in Brazil ahead of the October 30 deadline. One of these applications has already been rejected due to the company's failure to meet the new minimum capital standards, which include holding up to $7.2 million. Analysts estimate that only 10 out of around 300 companies will be able to comply with the regulations, including the design compliance plans and constant reporting requirements.
Foreign platforms like Lemon, an Argentina-based exchange, are exiting the Brazilian market due to the stringent requirements imposed by the central bank. Lemon cited that obtaining a license would require tying up a disproportionate amount of capital for its operation in Brazil. Exchanges already established in Brazil can still operate while their applications are being reviewed, but new applicants will have to wait up to three years for permits to be issued.
Industry associations are requesting an extension to the deadline due to the time required to implement the central bank's compliance and capital requirements recommendations. With only five VASPs having applied ahead of the deadline, Tatiana Guazzelli, a partner at Pinheiro Neto Advogados, believes that more applications will rise in October as companies clarify their doubts about the new regime.