Brazil Introduces Comprehensive Digital Asset Framework for VASPs

Brazil has taken a significant step in regulating the burgeoning cryptocurrency market by introducing a comprehensive framework for virtual asset service providers (VASPs). This new regulatory landscape aims to provide clarity and reduce uncertainty for institutions operating within or entering Brazil's crypto market, according to Fireblocks.

Framework Overview and Institutional Impact

The Central Bank of Brazil has outlined specific requirements for licensing, governance, reporting, custody, stablecoin flows, and foreign exchange (FX) treatment. These regulations are designed to align with the substantial institutional crypto activity in Brazil, which accounted for nearly one-third of all Latin American crypto flows between mid-2024 and mid-2025, as per Chainalysis data.

Institutions have until February 2026 to comply with these new requirements, followed by a nine-month transition period. This timeline allows firms to prepare for full compliance with the new supervisory structure.

Key Components of the New Rules

The framework mandates that all service providers, including custodians, intermediaries, exchanges, and platforms, must secure authorization as Sociedades Prestadoras de Serviços de Ativos Virtuais (SPSAVs). Foreign firms must either establish a local presence or partner with a licensed Brazilian entity to operate within the country.

Licensing and Custody

Under the new rules, firms are categorized as either custodian PSAVs, which hold client assets, or intermediary PSAVs, which rely on licensed custodians. This distinction influences how these entities manage their custody, risk, and technology infrastructures.

Segregation and Compliance

Client assets must be kept separate from firm assets, a principle reinforced during the public consultation process. While asset custody can be outsourced, the responsibility for oversight remains with the institution.

AML and Stablecoin Regulation

The regulations also cover Anti-Money Laundering (AML) protocols, the Travel Rule, and Know-Your-Wallet (KYW) processes. Cross-border stablecoin transactions are treated as FX transactions, requiring client identification and transaction monitoring.

Preparing for Compliance and Market Changes

As the regulatory landscape evolves, institutions are using this opportunity to enhance governance, formalize controls, and modernize their operations. The new standards are expected to drive consolidation in the Brazilian market, with larger banks and exchanges potentially absorbing smaller entities that cannot meet the new requirements.

Institutions are advised to focus on a comprehensive checklist that includes licensing pathways, asset segregation models, custody architecture, and compliance with the Travel Rule and KYW processes. Cybersecurity, audit readiness, and governance are also crucial focus areas.

Looking Forward

Brazil's new framework sets a high standard for VASPs, rewarding those who implement robust controls early on. As the market matures, firms that align with these regulations will be well-positioned to capitalize on the growing crypto economy.

Fireblocks is actively assisting institutions in navigating these changes, offering support in aligning governance, custody models, and operational infrastructure with the new regulatory requirements.