Brazil's Central Bank introduces the strictest cryptocurrency regulations in history: offshore trading and a capital threshold of at least 2 million USD.

Brazil has finally taken action to establish clear regulations for its rapidly growing yet long-unregulated crypto market. The new regulations will officially come into effect on February 2, 2026, and all encryption service providers will face high capital thresholds and forex trading restrictions.

A brand new regulation has come into effect, opening a new chapter in Brazil's crypto market.

The Central Bank of Brazil (Banco Central do Brasil) recently announced a comprehensive regulatory framework for the crypto market, covering service provider licensing systems, minimum capital requirements, and cross-border transaction regulations, becoming the most systematic regulatory attempt in the country to date concerning virtual assets.

This regulation, consisting of three main resolutions, will take effect on February 2, 2026. Existing businesses will have 9 months to meet compliance requirements, otherwise, they will not be able to operate legally in the local area.

This regulatory framework not only responds to the fast-growing demands of the market, but also puts an end to the multiple regulatory delays and industry backlash since 2019. Gilneu Vivan, the regulatory director of the Central Bank of Brazil, stated at a press conference: “Our challenge is to find a balance between innovation and security. The crypto market is highly reliant on technology while also bearing important responsibilities such as anti-money laundering, which requires strong protective mechanisms.”

The capital threshold is astonishingly high, and the industry is worried that the survival space for startups is being compressed.

According to the new regulations, encryption service providers must hold at least 10.8 million reais (approximately 2 million USD) in capital, while the threshold for certain types of businesses can be as high as 37.2 million reais. This figure is significantly higher than the range of 1 million to 3 million reais proposed during the previous public consultation phase.

In this regard, Bernardo Srur, president of the Brazilian Crypto Economy Association (ABCripto), stated that while the overall regulatory direction is “positive and necessary,” he still has reservations about capital requirements and urgent compliance deadlines, worrying that this will hinder competition and make it difficult for startups to enter the market.

In addition, all companies that do not meet the capital, security, customer review, and risk control standards within the deadline will lose their operating qualifications. For foreign companies, it is further required to establish a local legal entity and manage all business under that entity.

Encryption operators are included under forex regulation, and self-managed wallets are also restricted.

One of the highlights of the new system is the incorporation of various encryption transactions into Brazil's forex and cross-border capital flow management system. This includes:

Use stablecoins for international payments

Transfers between self-custody wallets

Cryptocurrency to fiat currency trading

Although companies holding a Virtual Asset Service Provider (VASP) license can still conduct these transactions, each transaction amount must not exceed $100,000 and must be reported to the central bank monthly, including details such as customer information, type of asset, amount (in reais), and the relationship between the parties involved.

At the same time, VASP must not handle any fiat currency, whether domestic or foreign, and must not use foreign cash for cryptocurrency purchases, further compressing the operational space in the gray area.

The VASP system is implemented, and encryption companies need to classify and hold licenses according to the law.

This regulation also officially defines a new legal entity: Virtual Asset Service Providers (Sociedades Prestadoras de Serviços de Ativos Virtuais, SPSAVs), namely VASP.

All VASPs must obtain licenses issued by the central bank and are divided into three main categories according to their business content:

Intermediaries

Custodians

Brokerages

This will help improve market transparency and allow regulators to categorize and manage different types of risks.

Transparency is a key objective, and central banks are targeting money laundering and arbitrage risks.

The Brazilian government emphasizes that the ultimate goal of this regulatory system is to prevent regulatory arbitrage, strengthen anti-money laundering efforts, and enhance the understanding of the flow of encryption capital, in order to incorporate it into official international balance of payments and economic statistical data.

With the implementation of this regulatory framework, Brazil is undoubtedly moving towards becoming one of the countries with the strictest encryption regulations in the world. Whether it can strike a balance between fostering innovation and ensuring market stability in the future remains to be seen.

This article discusses the Brazilian central bank's implementation of the most stringent cryptocurrency regulations in history: offshore trading, with a capital threshold of at least 2 million USD, first appeared in Chain News ABMedia.