Brazil Fights Cryptocurrency Crime Through Licensing Requirements and Pre-Trial Asset Liquidation

Brazil's central bank and government are moving forward with a twofold strategy to tackle organized crime and bring oversight to its rapidly expanding crypto industry. New regulations will require crypto businesses to be licensed, and a legislative proposal would allow authorities to sell confiscated digital assets before trials conclude. These initiatives are designed to counter the increasing use of cryptocurrencies for illegal purposes and to establish Brazil as a regulatory frontrunner in Latin America.

The central bank’s updated regulatory structure, which takes effect in February 2026, will require all virtual asset service providers (VASPs)—such as exchanges, custodians, and brokers—to obtain official approval by November 2026, as

explains. Depending on their business activities, companies must maintain capital reserves between $2 million and $17.8 million, and adhere to robust anti-money laundering (AML) and cybersecurity protocols, according to . Transactions involving stablecoins and cross-border crypto transfers are now considered foreign exchange activities, bringing new reporting and compliance duties, as highlighted in the . The regulations also set a $100,000 ceiling on unauthorized international transfers and require reporting of stablecoin payments and transfers to self-custody wallets, as stated in the . .

This regulatory initiative is part of Brazil’s larger plan to weave crypto into its financial landscape. With a crypto market valued at $319 billion—representing nearly a third of Latin America’s total—the government has stressed the importance of fighting fraud and money laundering, as mentioned in the

. Central Bank President Gabriel Galipolo has voiced concerns about stablecoins, which make up 90% of Brazil’s crypto transactions and are increasingly used for payments, complicating regulatory oversight, as reported in a .

Alongside these regulatory changes, President Luiz Inácio Lula da Silva has put forward the "anti-faction bill," which would let authorities liquidate seized cryptocurrencies during criminal probes, treating them similarly to foreign currency or securities, as

outlines. The bill, currently under urgent review in Congress, would allow financial institutions to convert confiscated crypto into fiat money before court decisions are reached, aiming to disrupt the financial networks of criminal groups like Comando Vermelho, as describes. This comes after a major police operation in Rio de Janeiro’s favelas that resulted in the deaths of 121 suspected gang members, highlighting the government’s intensified efforts against organized crime, as covered in the .

Some critics believe the short compliance window and steep capital requirements could hinder competition, especially for smaller players, as noted in the

. Bernardo Srur from the Brazilian Association of Cryptoeconomy described the new rules as "necessary," but cautioned that the limited transition period could stifle innovation, as reported in the . On the other hand, regulators argue these steps are crucial to balance innovation with security, ensuring that crypto firms meet the same standards as traditional financial institutions, as stated in the .

Together, these regulatory and legislative efforts demonstrate Brazil’s ambition to take the lead in digital asset regulation. By bringing crypto under foreign exchange rules and enabling prompt liquidation of seized assets, the country seeks to stem illegal financial flows and promote a transparent market. Nonetheless, challenges persist, such as guaranteeing fair valuation of confiscated crypto and safeguarding defendants’ rights in the event of acquittal, as mentioned in the

.