Key Takeaways
- Brazils strict new rules and $7.2M capital requirement are forcing massive crypto exchange exits.
- Just five VASPs applied ahead of the Oct 30 deadline, with analysts expecting only 10 of 300 to qualify.
- Foreign platforms like Lemon are exiting, and new applicants face up to a 3-year wait for permits.
Only Five Exchanges Have Applied for Operating Licenses in Brazil
The Central Bank of Brazil‘s proposed and approved crypto regulatory framework is consolidating the country’s crypto industry, with many exchanges terminating operations and exiting the country.
According to Valor Economico, only five virtual asset service providers (VASPs) applied to receive authorization to operate in Brazil, with one already rejected and four still under review.
Internal sources claim the rejected application came from a company that failed to prove it was operating in the country before February 2, when the new rules came into effect, and also did not meet the new minimum capital standards. The companies seeking approval were not disclosed.
Tatiana Guazzelli, partner at Pinheiro Neto Advogados, believes the number of applications will rise in October, as the companies clarify their doubts about the new regime and receive clarification from the central bank.
Nonetheless, the framework imposed by the central bank, which requires exchanges to deliver constant reports, design compliance plans, and hold capital of up to $7.2 million, has already taken a toll on the industry, with several companies exiting the market before October 30, when the deadline to introduce these applications ends.
Analysts estimated that only 10 VASPs out of around 300 companies would have the required structure to comply with the new regulations, including the minimum capital requirements to operate.
On September 17, Lemon, an Argentina-based exchange, communicated that it would wind down its operations. The company stressed that obtaining a license would require “tying up a disproportionate amount of capital for the size of our operation in that market.”
After October 30, other exchanges could apply to receive central bank authorization. Nonetheless, they will have to wait for these permits to be issued before launching operations, a process that could take up to three years.
Exchanges already established in Brazil can still operate while the bank reviews the application. Industry associations are requesting an extension to this deadline due to the time required to implement the central banks compliance and capital requirements recommendations.