Brazil Targets Stablecoin Loophole to Plug $30B Tax Gap

Brazilian authorities are considering extending the country's financial transaction tax (IOF) to cross-border stablecoin transfers, a move aimed at closing regulatory loopholes and boosting public revenue amid surging crypto activity. The proposal, first reported by Reuters, aligns with a broader regulatory overhaul by the Central Bank of Brazil, which classified stablecoins as foreign-exchange (FX) instruments earlier this year. Under the new framework, effective February 2025, the purchase, sale, and exchange of stablecoins will be treated as conventional FX transactions, subjecting them to the same oversight as traditional currency transfers.

The shift comes as stablecoins dominate Brazil's crypto landscape. Federal tax administration data show that crypto transactions in the first half of 2025 reached 227 billion reais ($42.8 billion), a 20% increase from the same period in 2024. Two-thirds of this volume involved USDT, the dollar-backed stablecoin issued by Tether, while Bitcoin accounted for just 11%. Government officials argue that stablecoins are increasingly used for payments rather than investment, creating risks for money laundering and tax evasion in a regulatory vacuum.

The proposed IOF extension targets a critical revenue gap. Federal police sources estimate that Brazil loses over $30 billion annually in customs duties and taxes due to imports paid for via stablecoins, where goods are under-declared and the remaining value transferred off-grid. "If you import machinery or inputs, declare 20% officially, and send the remaining 80% via USDT without paying customs duties, IOF is the least of your problems," one source told Reuters. The Finance Ministry, while declining to comment directly, has emphasized the need to align crypto transactions with traditional FX rules to prevent arbitrage according to the central bank.

The regulatory push also reflects Brazil's alignment with global standards. The country recently updated its crypto reporting requirements to comply with the OECD's Crypto-Asset Reporting Framework (CARF), enabling data sharing on overseas crypto holdings. This move mirrors efforts by the U.S., EU, and UAE to combat cross-border tax evasion. Brazil's central bank has also introduced stringent licensing rules for crypto service providers, requiring minimum capital reserves of up to $7 million and enhanced anti-money laundering (AML) protocols.

Market reactions remain mixed. While the tax could deter stablecoin use for remittances and imports, it may also provide a vital revenue boost for a government under fiscal pressure. Smaller investors could face higher liabilities under the new flat 17.5% tax on crypto gains, introduced in June 2025, which eliminated prior exemptions for monthly profits below R$35,000 ($6,300). Meanwhile, industry groups argue that stringent capital requirements in the new regulatory framework favor large incumbents like Nubank and XP Investimentos, potentially stifling competition .

Brazil's crypto market, already the largest in Latin America and fifth globally by adoption, is at a crossroads. The government's moves signal a decisive step toward integrating digital assets into the formal financial system, balancing innovation with fiscal discipline. As the Finance Ministry finalizes the tax's scope, stakeholders await clarity on how the IOF will apply to stablecoin transactions-and whether the country's crypto boom will adapt or slow.