Leading cryptocurrency and fintech associations in Brazil have issued a strong warning against expanding a financial transaction tax to stablecoin operations. Industry groups, representing more than 850 companies, argue such a move would violate Brazil's Constitution and Virtual Assets Law, as stablecoins are not legally considered fiat currency.
They contend that the existing tax framework, known as IOF, is strictly for currency exchange transactions involving fiat currency. The Virtual Assets Law, enacted in 2022, explicitly excludes virtual assets from this definition, making any attempt to tax stablecoins through a decree or administrative rule unlawful. The associations also caution against conflating oversight with taxation policy. Brazil's crypto sector, a significant global market with an estimated 25 million participants, is rapidly expanding, and policy missteps could severely damage its growth.