Brazil Weighs Taxes on Cross-Border Crypto Payments

Brazil is considering a tax on cross-border cryptocurrency payments, Reuters reported Tuesday (Nov. 18), citing unnamed sources.

Such a move could close a loophole in Brazil’s normal tax on international transactions, the report said.

Brazil’s Finance Ministry is weighing an expansion of its financial transaction tax (IOF) to cover some cross-border transfers that use virtual assets and stablecoins that the country’s central bank this month classified as foreign exchange operations, per the report.

The IOF tax does not currently cover crypto transactions, according to the report. Investors need to pay income tax on capital gains from crypto assets that exceed a monthly exemption.

Although the move is aimed at closing a loophole, it could still boost public revenue amid a stablecoin-fueled surge in Brazil’s crypto market, the report said.

Crypto transactions in Brazil hit 227 billion reais (about $42.6 billion) in the first half of this year, a 20% increase from a year earlier. Two-thirds of that volume came from Tether’s USDT stablecoin, while bitcoin made up just 11% of transactions, according to the report.

Brazil’s move comes as stablecoins find their footing in cross-border payments. As these tokens become more ingrained with the financial plumbing, the first casualties “will be margin structures built on friction,” PYMNTS reported Nov. 10.

The cross-border market is the most obvious weak point of traditional finance and a natural starting point for stablecoins.

“The encouraging part is that there’s been a real kind of product market fit around payments and stablecoins,” Bryce Jurss, vice president, head of Americas, digital assets at Nuvei, said in a September interview with PYMNTS. “The real opportunity isn’t about chasing the buzzwords, but it’s more about being disciplined, identifying where stablecoins truly outperform a so-called legacy payment system.”

Correspondent banking fees, foreign exchange spreads and cross-border settlement costs are “relics of a trust-based architecture,” the report said, adding that when settlement becomes instantaneous and global, the justification for those fees may vanish.

“Moving $10 [million] to $30 million across borders into exotic corridors typically takes three to five business days,” Stable Sea CEO Tanner Taddeo told PYMNTS in a July interview. “With stablecoins, it can settle in four to eight hours.”