Latam Insights Encore: If Applied, Brazil's Stablecoin Remittance Tax Will Be a Net Negative for the Industry

Sometimes, while taxation seems like the right step to take, more so when adopting the “same activity, same risk, same regulation” approach, the feasibility and the possible downsides of a tax outweigh its benefits. This might be the case with the stablecoin remittance taxation proposal recently floated by the Central Bank of Brazil to industry stakeholders.

Latam cryptocurrency news round-up: Brazil mulls tax on stablecoin remittances

The Central Bank of Brazil (BCB) has proposed taxing the use of stablecoins for making remittances, a move that could drive retail users away from regulated exchanges, according to industry stakeholders.

The BCB presented the proposal to cryptocurrency exchanges and other industry representatives last week, as part of its efforts to standardize the regulation of all financial activities.

Under the proposal, any individual or company making remittances using stablecoins would be subject to a tax. The tax rate would be determined by the government and could vary depending on the amount of money being remitted.

Industry stakeholders have welcomed the move, saying that it would create a level playing field for all remittance providers. However, they have also raised concerns about the impact of the tax on retail users.

Currently, retail users can make remittances using stablecoins without paying any fees. This is because exchanges typically cover the cost of the transaction in order to attract new users.

However, if the government imposes a tax on stablecoin remittances, exchanges would likely pass on the cost to their users. This could make remittances more expensive for retail users and drive them away from regulated exchanges.

“The market will find alternatives,” one industry insider told CoinDesk. “People will not want to pay a spread imposed by the Central Bank.”

The BCB’s proposal is still in the early stages and could be changed before it is implemented. The government is expected to announce its final decision on the matter within the next few months.