Brazil, one of the largest economies in Latin America, is preparing to make regulation for virtual asset service providers (VASPs) effective by 2026. According to local reports, authorities at the Central Bank, the sector watchdog, are currently finalizing the rules these institutions must follow to operate in Brazil.

Nagel Paulino, part of the Central Bank’s Financial System Regulation Department, stressed that the institution was under “pressure from all sides for regulation, especially from the Public Prosecutor’s Office, the Federal Police, and the Central Bank’s own board.”

While cryptocurrency sector regulation was enacted in 2022, requiring VASPs to receive approval from the central bank to operate, these rules have never been applied due to the central bank’s moratorium.

Paulino stated that these rules are already being worked on, with a balanced approach that benefits both regulators and market actors. He stressed that the current focus allows “for freedom, but without being too bold, building a safe, preventative framework.”

In addition, he pointed out that the upcoming rules must not create asymmetries between international regulatory frameworks and the Brazilian market. If this happens, there is the danger of a mass migration towards other markets due to the characteristics of crypto.

“It is not difficult to move to a country that has no regulation,” Paulino assessed.

To conclude, Paulino believes that Brazil will become a trend-setting nation when it comes to crypto asset regulation in Latam. “We all follow guidance from international entities, and this interaction is important,” he concluded, highlighting the need for international coordination in the law-establishing processes.

In 2024, Paulino himself claimed that these rules could be finalized by 2025, linking the delay to the local VASP ecosystem’s particularities.

Read more: Central Bank of Brazil Aims to Finalize Crypto Exchange Regulation by Early 2025

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