Brazil’s new Finance Minister Dario Durigan is expected to delay a public consultation on applying a financial transactions tax, known locally as Imposto sobre Operações Financeiras (IOF), to certain cryptocurrency transactions, Reuters reported, citing sources familiar with the matter.
Durigan took office on March 20 after Fernando Haddad resigned to run for governor of São Paulo. Reuters said the new minister wanted to focus on microeconomic measures and avoid proposals that could trigger conflict with Congress in an election year.
The postponed consultation focused on a draft decree that could qualify certain cryptographic transactions as foreign exchange transactions.
This is important because foreign exchange transactions in Brazil can face IOF rates ranging from 0.38% on some inbound flows up to 3.5% on purchases, remittances and card spending abroad. Transfers intended for foreign investments may face a rate of 1.1%.
The proposal has already sparked reactions from large industrial groups. In a joint statement, ABcripto, ABFintechs, Abracam, ABToken and Zetta, which together represent more than 850 companies, said applying IOF to stablecoin transactions would be illegal under the Brazilian constitution and the country’s Virtual Assets Law of 2022.
They argued that stablecoins are not fiat currency and cannot be treated as foreign exchange instruments by executive order or administrative rule.
The proposal gained attention in February after the central bank classified part of the crypto market, particularly certain stablecoin activities, within the scope of exchange rules. This gave the Ministry of Finance and tax authorities a basis to study whether these transactions should fall under the IOF.
The department could also shelve a separate proposal to end tax breaks on certain investment securities.
