Argentina regulates tax on crypto and Brazil may follow the same path

Introduction: regulation arriving in Latin America

Last week, the City of Buenos Aires, in Argentina, took an important step in regulating how the tax onGross Income— a state tax — for cryptocurrency operations. The measure, published by the Public Income Administration (AGIP), establishes clear criteria for the taxation of transactions involving digital assets, such as Bitcoin and Ethereum. Although Argentina is facing a deep economic crisis, with inflation exceeding 200% per year, the decision signals that local governments are looking for ways to include cryptocurrencies on the fiscal radar.

In Brazil, where the cryptoactive market moved more thanR$2 trillionIn 2023 — according to data from the Federal Revenue Service — the discussion about tax regulation will also gain strength. Experts are already debating whether the Argentine model could be adapted to the Brazilian context, especially after the recent decision by the STF that excluded the IOF on operations with cryptocurrencies. Given this scenario, Argentine regulation serves as a case study for Brazil, which is still awaiting more concrete definitions from the Federal Revenue Service on how to tax gains from digital assets.

Development: How Argentina is taxing cryptocurrencies

AGIP determined that transactions with cryptocurrencies will be taxed based on theoperated value, and not just about profits. This means that, even if the investor has not received a net gain, the transaction may be subject to charges. According to the regulations, the tax on Gross Income — which can reach up to 5% in the province of Buenos Aires — will be levied on the gross value of the operation. For purchase and sale transactions, for example, the calculation will be made on the total amount moved, not just on the difference between purchase and sale.

Furthermore, AGIP determined that crypto exchanges and platforms must act asretention agents, that is, withholding and passing on the tax amount to the government. This measure seeks to prevent tax evasion and ensure that operations are properly declared. For the Argentine market, which is facing a strong devaluation of the peso and a growing adoption of crypto as a store of value, the measure could represent an increase in operating costs. However, according to local analysts, the regulation brings more legal certainty, allowing investors and companies to operate with greater predictability.

In Brazil, the discussion about the taxation of cryptocurrencies has also advanced recently. In March 2024, the Federal Supreme Court (STF) decided that theIOF cannot be chargedon cryptocurrency operations, a victory for the sector. However, the IRS has not yet published definitive rules on how gains from crypto assets should be declared. Currently, the IRS requires transactions above R$35,000 to be declared, but there is no clarity on how to calculate tax on profits, especially in cases of multiple transactions on different exchanges.

Impact on the market: what to expect for Brazil?

Argentine regulation shows that governments are increasingly paying attention to the growth of the cryptocurrency market. In Brazil, where the sector moved aroundR$2 trillion in 2023— an increase of 30% compared to 2022 — the absence of clear rules creates uncertainty for investors and companies. According to theFederal Revenue Annual Cryptoasset Report, more than 1.5 million Brazilians declared to own cryptocurrencies in 2023, a number that tends to grow with the popularization of assets such as Bitcoin and stablecoins.

For the Brazilian market, Argentine regulation can serve as acase study. If the measure proves effective in preventing tax evasion and bringing more legal certainty, other countries in the region, including Brazil, may follow the same path. However, the way taxation will be applied is crucial. In Brazil, charging on the amount operated — as in Argentina — could increase the tax burden on investors, especially those who carry out multiple operations. On the other hand, the Federal Revenue could opt for a model similar to that ofIRPF, taxing only profits, as occurs with shares on the Stock Exchange.

Another point of attention is the impact on exchanges. In Brazil, platforms are already required to report suspicious operations to theCOAF (Financial Activities Control Council), but there is no clear rule about tax withholding. If the Argentine model is adopted, Brazilian exchanges could be forced to act as retention agents, which would require technological and operational adaptations. According toABRACrypto (Brazilian Cryptocurrency Association), regulation must be balanced, ensuring transparency without stifling the market.

Furthermore, Argentina's decision comes in a context of growing adoption of cryptocurrencies as a store of value, especially in countries with unstable currencies. In Argentina, where inflation exceeded211% in 2023, Bitcoin and stablecoins like USDT have gained popularity as an alternative to the peso. In Brazil, although inflation is under control, distrust in relation to the real and the search for alternative assets are also driving the crypto market. According toChainalysis, Brazil was the12th largest cryptocurrency market in the world in 2023, with a transaction volume of more than US$100 billion.

Conclusion: regulation is inevitable, but needs to be balanced

Argentina's regulation on cryptocurrency taxation is an important milestone for the Latin American market. Although the measure may increase the tax burden for investors and companies, it also brings more legal certainty and transparency, two essential factors for the sector's growth. In Brazil, where the cryptoactive market already generates trillions of reais, the lack of clear rules generates uncertainty and can deter institutional investors.

For Brazilian regulation to be successful, it is essential that the government listens to the market and adopts a balanced model that does not excessively burden investors and that maintains the sector's competitiveness. The IRS has until the end of 2024 to publish definitive rules on the taxation of cryptocurrencies, and the Argentine decision can serve as a reference. Meanwhile, investors and companies must prepare for a scenario of greater supervision, keeping detailed records of all operations and seeking professional guidance to avoid problems with the tax authorities.

One thing is certain: cryptocurrency regulation is inevitable, and countries that adopt clear and transparent rules will have a competitive advantage in the global digital asset market. It remains to be seen whether Brazil will follow the Argentine example or follow its own path, based on the particularities of its market.