A new law that came into effect a few months ago has forced two cryptocurrency exchanges in Brazil to shut down. The law requires that the exchanges report to authorities every transaction or face high fines. This has seen a drastic decline in crypto trading volumes, forcing two exchanges to call it quits in the past week alone.
The two exchanges, Acesso Bitcoin and Latoex shut down in fear of punitive measures by the Federal Revenue Service. The two cited the new legislation as the reason for the exit, revealing that things started going downhill when it came into effect.
Known as the Normative Instructions 1888, the legislation requires, among other things, that crypto exchanges report every transaction they process. Those that fail to comply will be subject to severe penalties, including a $346 fine per month. It also requires them to adhere to more stringent compliance requirements.
The co-founder of Acesso Bitcoin Pedro Nunes told Brazilian crypto outlet Portal do Bitcoin, “After the Federal Revenue Service introduced these rules we noticed a significant decrease in the traded volume. We also feel that the market has cooled for smaller exchanges.”
Nunes urged users to withdraw or transfer their funds from the exchange, stating, “We recommend that anyone who has funds in Bitcoin to transfer to other exchanges. Those who have funds in BRL [Brazilian Real], can make withdrawals at any time, within the terms that were practiced while we were operating normally.”
Sao Paulo-based Latoex also shut down this week but is yet to reveal why. Its users are also able to withdraw their funds or transfer their tokens to other exchanges or wallets.
It’s been tough in Brazil for crypto exchanges for a while now, with the lack of proper regulations doing a great disservice to the industry. The country’s banking institutions have used this to deny basic banking services to the exchanges. As CoinGeek reported last month, some of Brazil’s largest banks have already started closing bank accounts belonging to crypto. One of these banks, Bradesco, cited high money laundering risks as one of the reasons it stopped supporting crypto.
Crypto exchanges have in the past sued these banks for denial of service, with most of them winning their lawsuits. Last year, Bradesco was forced to pay legal fees and fines after a court sided with M Intermediação e Prestação de Serviço crypto exchange in a legal battle between the two. Walltime exchange also won a similar case just days prior against Caixa Econômica Federal bank which had also closed its account.
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