VASPs regulation has begun: foreign exchanges will have to comply with Brazilian rules

A VASPs regulation (Virtual Asset Service Providers) in Brazil came into force on Monday (2).

With the advance of Central Bank regulations, Foreign cryptocurrency exchanges serving Brazilians officially enter the regulatory radar, even though it has no physical headquarters in the country.

In practice, this represents a profound change in the crypto environment in Brazil, especially for users who use international platforms seeking less regulatory friction and greater privacy.

International exchanges will have to create CNPJ to serve Brazilians

Central to the new regulations is the concept of offering services to residents in Brazil. If a foreign exchange allows account opening, support in Portuguese, targeted marketing or a Brazilian domain, the Central Bank can characterize this activity as providing services in the country.

In this scenario, the company will need to:

• Set up CNPJ in Brazil
• Request authorization to act as VASP
• Submit to Central Bank supervision
• Comply with compliance, governance and anti-money laundering rules

In other words, it's not enough to be legally “outside Brazil”. If the service reaches Brazilians, so does regulation.

Reporting information to the IRS

Once classified as a VASP in Brazil, the exchange will have direct data reporting obligations to the IRS, This includes:

• Monthly information on customer movements
• Consolidated annual statements
• User identification data
• Transaction history, amounts moved and assets traded
• Obligation to inform if the withdrawal wallet is yours, for subsequent on-chain tracking

This model dialogues with the existing logic of the IN RFB nº 1.888/2019, but now with direct institutional cooperation between the Central Bank and the Federal Revenue Service, raising the level of vigilance over crypto-asset transactions.

In practice, this drastically reduces any illusion of anonymity when using regulated exchanges.

What changes for Brazilian users

For the end user, the change is both bureaucratic and structural.

• Greater standardization of KYC and AML
• Increased automatic data sharing
• Risk of blocking or closing accounts on platforms that choose to leave the Brazilian market

Exchanges that do not wish to comply with these requirements may even, as a last resort, block Brazilian users, whether by IP, nationality or documentation.

In other words, it's possible, but unlikely, that you'll be able to continue trading on a foreign exchange that decides to close its doors to Brazilians, even with a VPN. Because the broker could close your account due to national documentation.

And if the exchange you use continues to function normally for the next few weeks, assume that it may already be operating as a national exchange in terms of sharing its transactions.

How to continue operating outside this model

Faced with this scenario, many users may look for alternatives that do not depend on regulated custodial VASPs, such as:

• Decentralized or semi-decentralized exchanges such as Uniswap e SideSwap
• P2P platforms such as HodlHodl, Bisq e Haveno

A fundamental distinction is worth making here: Self-custody of crypto-assets is not prohibited, It doesn't even depend on state authorization to function. Regulation always affects centralized intermediaries, not cryptocurrencies directly.

However, the more you depend on centralized companies, the more exposed it is to fiscal and regulatory surveillance.