Only 40 Crypto Firms Survive Brazil’s Strict Licensing Deadline
Key Takeaways
- Only 40 of 200 crypto firms met Brazil’s licensing deadline, forcing most to wind down operations.
- Costly daily reporting rules forced out small firms, leaving larger players to supply crypto infrastructure.
- Starting Nov. 6, banks will block transactions for unlicensed crypto firms, severing their fiat access.
Around 40 Companies Applied to Continue to Operate as VASPs in Brazil
The period established by the Central Bank of Brazil for virtual asset service providers (VASPs) to submit a request to continue operating in the country has finished, and the balance indicates that a majority of firms decided to exit the market.
According to local reports, of the expected 150 to 200 crypto firms, only around 40 applied to continue to operate and comply with central bank regulations, consolidating the service provider ecosystem.
Companies that completed and filed their applications will continue operating while the bank reviews their applications, while firms that did not apply will have a month from the October 30 deadline to wind down their activities and exit the market in an orderly manner.
While more companies might apply to become licensed and operate in Brazil, the central bank will have up to 2 years to respond to any application, making any attempt to enter Brazil a long process for any company not present today.
Tiago Severo, the crypto authority at Panucci, Severo e Nebias Advogados (PSNA), a Brazilian law firm, said the low number of firms applying is not only explained by the high capital requirements, but also by costs of complying with the reporting schedule the new framework establishes.
Severo told Livecoins that now, each company “must send custody of each client to the Central Bank every day and proof of reserves every month, have three years of audited balance sheets and a money laundering prevention program capable of undergoing audit.” “Many smaller platforms concluded they couldn’t sustain this,” he assessed.
Nonetheless, larger firms like Binance and Itaú did file applications, meaning customer capital will be custodied by companies with larger security budgets, which would result in better security protocols in practice.
For Severo, these larger firms will serve as infrastructure and service providers to smaller companies, which will rely on them to offer crypto services to their customers. “Medium-sized banks, cooperatives, and retailers will be able to offer crypto without setting up an exchange by hiring an authorized provider. The central legal question becomes who provides the regulated service and who responds to the customer,” he explained.
Starting on November 6, banks and payment providers will not be able to facilitate transactions for VASPs outside the regulatory regime, effectively crippling their ability to reach Brazilian customers using the legacy fiat system.
