Brazil’s new Finance Minister Dario Durigan is expected to delay a public consultation on applying a financial operations tax, known locally as Imposto sobre Operações Financeiras (IOF), to some 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 wants to focus on microeconomic measures and avoid proposals that could trigger a conflict with Congress during an election year.
The postponed consultation focused on a draft decree that could classify some crypto transactions as currency exchange operations.
This is important because foreign exchange agreements in Brazil can face IOF rates ranging from 0.38% on some incoming flows to up to 3.5% on foreign purchases, remittances and foreign card spending. Transfers for investments abroad may face a rate of 1.1%.
The proposal has already received criticism from major industry groups. In a joint statement, ABcripto, ABFintechs, Abracam, ABToken and Zetta, which together represent more than 850 companies, said that applying IOF to stablecoin transactions would be illegal under Brazil’s constitution and the country’s Virtual Assets Law of 2022.
They argued that stablecoins are not fiat currency and cannot be treated as currency exchange instruments by decree or administrative rule.
The proposal drew attention in February after the central bank classified part of the cryptocurrency market, especially some stablecoin activity, within the scope of foreign exchange rules. That gave the Ministry of Finance and tax authorities a basis to study whether such transactions should be included in the IOF.
The ministry could also shelve a separate proposal to end tax exemptions on some investment securities.
