Brazil's central bank is imposing capital requirements of up to 37.2 million reais (nearly $7.2 million) on crypto firms, and analysts say only a fraction of the market can meet them. Of an estimated 300 virtual asset service providers operating in the country, just ten are expected to keep their license once the rules take effect.
Brazil's crypto industry is heading toward a profound transformation as new central bank rules push most exchanges and crypto institutions toward the exit. Of an estimated 300 virtual asset service providers (VASPs) currently operating in Brazil, only 20 to 25 would have the structure to apply for authorization, with just ten actually obtaining a license to keep operating.
Capital requirements price out smaller platforms
The central bank's prudential capital requirements are the main roadblock for smaller companies, which would need to hold capital of up to 37.2 million reais, nearly $7.2 million, depending on their classification. Analysts say the new capital requirements and auditing procedures would decimate providers that cannot meet all of the central bank's demands.
Capital is not the only compliance issue crypto firms face in Brazil, however. The whole structure of compliance — including auditing, AML/CTF procedures, and constant reporting to the central bank — adds costs that make it economically unfeasible for smaller firms to keep operating, according to local reports.
Some smaller firms have already exited the market: Bitnuvem, NovaDAX, Digitra, and Coinext all announced the end or restructuring of their retail operations, though they did not attribute these decisions to the new rules.
Ripple executive frames the shift as a market correction
Isabel Longhi, director of Public and Regulatory Policies for Latin America at Ripple, said the wave of exits represents a market correction that will restrict innovation for the time being. Speaking to Valor Investe, she said "Market downsizing is natural and should happen." She added that the goal should be separating serious players from the rest, not eliminating firms simply because they are small.
The scale of the consolidation will only become clear after October 30, when firms must apply for authorization. VASPs that do not apply will then have 30 days to wind down operations and notify customers of the closure from Brazil's cryptocurrency exchange market.
Source: Bitcoin News
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