Lawmakers in Brazil have garnered support to create and enforce tax regulations for the cryptocurrency industry following reports of rampant fraud in the sector last year. Now, the effects of those regulations are being felt: according to Bitcoin.com, two of the country’s cryptocurrency exchanges–Acesso and Latoex–have made the decision to shut down in the face of hefty fines, stricter rules, and dwindling trading volumes.
Acesso Bitcoin, one of the crypto exchanges that will shut down, points to the current situation created by the new regulations as the main reason for its shutdown.
The new regulations made have impacted crypto trading volumes
“After the Federal Revenue Service introduced these rules we noticed a significant decrease in the traded volume,” said Pedro Nunes, the exchange’s co-founder, according to Portal do Bitcoin. “We also feel that the market has cooled off for smaller exchanges,” he added. (Translated quote.)
The new regulations, which were implemented in the latter half of 2019, require crypto holders to report all transactions involving cryptocurrencies. The rules apply to individuals, as well as companies and brokerages. The regulation also includes all crypto-related activities–in addition to buying and selling, hodlers must report donations, barters, deposits, withdrawals, and other activities.
Those who fail to adequately report their crypto transactions are subject to penalties ranging from 500 Brazil reals (BRD) to 1500 BRD, or from $120 to $360. Beyond the fines, however, compliance with the new regulations also requires investments into new resources–a cost that some exchanges can’t seem to swing.
Latoex also cites pressure from the new regulation
Latoex (Latin America Token Exchange, formerly known as E-Juno) us the second Brazilian crypto exchange to have recently made the decision to permanently close its doors.
Latoex has also cited the new tax laws as the primary reason for its demise. The shutdown was confirmed last week by Deigo Velasques, the chief executive of the exchange’s investment arm, Latoex Capital. Latoex Capital, which split off from the exchange in December, may stay operational after the exchange ceases its operations.
In the meantime, however, Latoex’s exchange is selling its assets to other companies and returning its funds to its clients. The exchange is also reportedly attempting to reverse a suspension order issued by Brazil’s Securities and Exchange Commission, or else face a $23,000 fine if Latoex does not follow through with its decision.
Brazil still lacks comprehensive crypto regulations
While the country is lacking more general cryptocurrency industry regulations, there are multiple proposals for cryptocurrency regulations currently making their way through Brazil’s national congress.
Bill 2303/2015, the most comprehensive of these bills, was introduced to the Brazilian Chamber of Deputies nearly five years ago before being archived in 2018 and later placed back on the agenda in March 2019. Two other bills, PL 3825/2019 and PL 3949/2019, are currently being reviewed by the Senate.
The shutdowns in Brazil are somewhat similar to several decisions by several European cryptocurrency companies that have made the decision to either cease operations or move abroad after the implementation of the Fifth Anti-Money Laundering Directive (5AMLD.)