Brazilian industry leaders from 850 firms express concern over tax implications for stablecoins.

They contend that the tax would be unlawful, breaching Brazil’s Constitution and Virtual Assets Law, as stablecoins are not classified as fiat currency.

(Rafaela Biazi/Unsplash/Modified by CoinDesk)

What to know:

• Brazilian cryptocurrency organizations are against the extension of the IOF financial transaction tax to stablecoin transactions.
• They maintain that the tax would contravene Brazilian law, as stablecoins are not recognized as fiat currency.
• The sector warns that the proposed tax could stifle innovation and hinder the development of Brazil’s extensive digital asset industry.

Leading cryptocurrency and fintech organizations in Brazil have expressed concerns that extending a financial transaction tax to stablecoin operations could inhibit innovation and contravene existing legislation.

In a collective statement issued to CoinDesk, industry groups ABcripto, ABFintechs, Abracam, ABToken, and Zetta indicated that recent talks about broadening a tax on financial transactions (known locally as Imposto sobre Operações Financeiras, or IOF) to include stablecoin transactions raise both legal and economic issues.

These organizations represent over 850 firms within Brazil’s financial technology, virtual asset, and market infrastructure sectors, as stated in their announcement.

The discussion revolves around a tax applied to specific financial transactions, including foreign exchange dealings. The associations argue that imposing the tax on stablecoin transactions would contradict Brazil’s existing legal framework and adversely impact the nation’s crypto sector.

They assert that the Constitution specifies the IOF as applicable solely to the settlement of currency exchange transactions involving either national or foreign fiat currencies. According to them, stablecoins do not fulfill that definition.

Brazil’s Virtual Assets Law, enacted as Law No. 14,478 in 2022, clearly states that virtual assets do not qualify as national or foreign fiat currency, according to the statement. The industry groups contend that this distinction implies stablecoins cannot be legally regarded as instruments representing foreign currency under the IOF regulations.

Consequently, the organizations argue that any attempt to broaden the tax through a decree or administrative regulation would be illegal. Brazil’s constitutional framework mandates that new taxes or expanded tax triggers must receive legislative approval.

“In this context, any expansion of tax incidence on operations with stablecoins through a decree or administrative rule is illegal, since acts of this nature cannot create or expand a tax triggering event,” the document states.

The groups also warned against confusing regulatory measures from Brazil’s central bank with taxation policy. They emphasized that supervision of digital asset transactions does not inherently warrant the application of the IOF tax to those activities.

Industry representatives caution that policy errors could harm a rapidly evolving sector. Brazil has become one of the largest crypto markets globally, with approximately 25 million individuals engaged in the ecosystem.

Brazil’s stablecoin adoption

The associations noted that the country’s crypto sector has flourished amid a broader wave of financial innovation, encompassing fintech platforms, digital payments, and blockchain infrastructure. They pointed out that comparable taxes on stablecoin transactions are not widely implemented in other major economies.

There has been a significant increase in stablecoin usage in Brazil over recent years, establishing the country as one of the largest markets for these assets in Latin America and worldwide.

Dollar-pegged tokens such as Tether’s USDT and Circle’s USDC now dominate crypto activities, as Brazilians utilize them to mitigate volatility in their fiat currency, the real (BRL), transfer funds across borders at lower costs, and enhance trading liquidity.

According to an auditor from Brazil’s tax authority, Receita Federal, the nation’s crypto market is transacting between $6 and $8 billion monthly, with 90% of this volume attributed to stablecoin activities.

Not all transactions involve U.S. dollar stablecoins, as BRL-pegged stablecoins are also gaining popularity. Trading in tokens linked to the Brazilian real reached approximately $906 million in the first half of 2025, based on data from Dune.