USDT transactions have been on the rise in Brazil since 2021, but for the first time, they surpassed Bitcoin’s volume in July 2022, right at the peak of the cryptocurrency industry’s boom last year, when cryptocurrency lending companies Three Arrows Capital and Voyager Capital collapsed.
The government reports that the cryptocurrency winter cut nearly 25% of domestic cryptocurrency trading volume in 2022, ending at 154.4 billion Brazilian Real, roughly equivalent to ~31 billion USD.
The Brazilian tax authority monitors citizens’ cryptocurrency-related activities using a complex system based on artificial intelligence and network analysis. According to a blog post, this system can detect suspicious activities and track the locations of individuals engaged in cryptocurrency transactions.
The tax authority is also targeting investments in cryptocurrencies held by its citizens abroad. On October 25th, the local Parliament passed a law recognizing cryptocurrencies as “financial assets” for tax purposes on foreign investments. Income earned abroad ranging from 6,000 to 50,000 Brazilian Real (~10,000 USD) will be subject to a 15% tax rate starting from January 2024. Beyond this threshold, taxes will be applied at a rate of 22.5%.
Since 2019, cryptocurrency exchanges operating in Brazil have been required to disclose all user transactions to the government. Income from cryptocurrency sales exceeding 35,000 Brazilian Real (~7,000 USD) per month is subject to progressive taxation ranging from 15% to 22.5%.