Our Partner Tiago Severo Gomes was featured in an article by Portal do Bitcoin on the ongoing consolidation of the Brazilian virtual asset market, today the most visible effect of the sector's regulation.
The backdrop is a regulatory funnel. Under Law 14.478/2022 and the Central Bank resolutions, together with the new tax and reporting obligations of the Receita Federal, virtual asset service providers are now subject to capital, governance, internal controls and anti-money laundering requirements close to those of financial institutions. With the October deadline to apply for authorization from the Central Bank, the bar has stopped being a thesis and become an operating cost, and smaller companies are already announcing closures, exits from the country or searches for mergers.
In practice, this is what Tiago points out:
- The entry into force of the Central Bank's framework, combined with the Receita Federal's obligations, has raised the level of governance, capital, internal controls, compliance, anti-money laundering, cybersecurity and transparency required of companies.
- This environment reduces room for poorly structured models or those that operated with a narrow compliance margin, which pushes part of the market toward winding down operations, leaving the country or pursuing M&A to gain scale and spread costs.
- The upside is institutional strengthening: better capitalized companies with robust risk management tend to earn the trust of investors, financial institutions and regulators.
- The risk lies in calibrating the bar, and that is where the sector's tension lies.
As Tiago Severo puts it: "An excessively burdensome regulatory environment may reduce competition, make it harder for new participants to enter and concentrate the market in a few large economic groups."
The bar has been set. What the market and the regulator are still contesting is the dosage: security and consumer protection on one side, competition and the entry of new players on the other, with the October calendar determining who makes it through the funnel.
Read the article on Portal do Bitcoin.
