Crypto regulation in the world weekly digest #173

Brazil

Brazil is moving to impose the Imposto sobre Operações Financeiras (IOF) – its financial transaction tax – on cross-border cryptocurrency and stablecoin transactions starting in February 2026, in a bid to close regulatory gaps that have allowed significant tax leakage via the use of stablecoins for international payments.

The IOF tax, traditionally applied to foreign exchange transactions, will now extend to international crypto transactions including stablecoin usage, mirroring the requirements already in place for fiat currency transfers. This measure aims to prevent individuals and businesses from circumventing taxes and import duties by funneling payments through crypto rails instead of the banking system. Annual government losses from such loopholes are estimated at over $30 billion. The change is part of a broader regulatory tightening, which also brings crypto service providers under stricter licensing and reporting rules and aligns local standards with OECD and global crypto reporting frameworks.

The new IOF regime and stricter licensing requirements for Virtual Asset Service Providers take effect February 2, 2026, with transitional enforcement measures rolling out through May 2026. Brazilian authorities will treat stablecoins as equivalent to FX transactions, and any international transfers via crypto above $100,000 will be subject to additional scrutiny and disclosure requirements under the new resolutions adopted in November 2025. Crypto brokerages, custodians, and intermediaries face new AML/CTF obligations, minimum capital thresholds, and expanded reporting mandates as part of Brazil’s compliance overhaul.

Brazil’s reforms are designed to synchronize with international frameworks like the Crypto-Asset Reporting Framework (CARF). These measures will enhance data sharing on cross-border crypto flows and contribute to the fight against tax evasion, customs fraud, and illicit finance.

Central Asia and India

Across Eurasia, a new phase of monetary innovation is taking shape as governments experiment with stablecoins backed by national currencies or sovereign assets. This movement reflects a broader shift: states are no longer content to let private actors dominate digital finance. Instead, they are exploring how blockchain-based money — long associated with decentralization — can be adapted to strengthen monetary sovereignty. Three countries in particular illustrate this trend: Kyrgyzstan, India, and Kazakhstan.

Kyrgyzstan has emerged as one of the most aggressive adopters of government-linked stablecoins. Building on its earlier digital som initiatives, the government has supported the issuance of som-pegged tokens on public blockchains, particularly through partnerships within the BNB Chain ecosystem. At the same time, Kyrgyz authorities have overseen the launch of asset-backed stablecoins, including a gold-collateralized token pegged to the U.S. dollar called Gold Dollar (USDKG). Although these projects vary in structure, they share a common aim: to create digital instruments that combine the stability of sovereign or tangible assets with the transparency and programmability of blockchain technology.

India, meanwhile, is charting a very different but equally significant course. Instead of relying solely on its central bank digital currency efforts, the country is preparing to introduce a rupee-pegged stablecoin issued on a public blockchain under strict government regulation. Known as the ARC token, this project is designed to be fully backed by secure, high-quality sovereign instruments — such as government securities and treasury bills — ensuring one-to-one convertibility with the Indian rupee. India’s motivation is strategic: policymakers hope that a regulated, transparent stablecoin can reduce capital flight into foreign dollar-denominated stablecoins, strengthen the presence of the rupee in digital markets, and even lower government borrowing costs by tying stablecoin issuance to the demand for sovereign debt. With plans targeting a 2026 launch, India's government is currently weighing the adoption of a dedicated stablecoin regulatory framework, which would represent a significant policy shift from the Reserve Bank of India's ongoing cautious stance on crypto assets.

Kazakhstan offers yet another perspective on state-backed stablecoins. Building on years of digital-finance initiatives, the country has begun piloting a tenge-pegged stablecoin issued through a regulatory sandbox overseen by the National Bank. Implemented in cooperation with financial institutions and blockchain developers, the stablecoin Evo — runs on modern public-chain infrastructure such as Solana and integrates with established payment technologies through partners like Mastercard. This hybrid design allows the stablecoin to function within traditional financial rails while benefiting from blockchain efficiency. For Kazakhstan, the project serves as a controlled yet ambitious experiment: a way to encourage fintech development, expand payment options, and reinforce the role of the tenge in a digitising economy without fully committing to a broad public rollout from the outset.

Thailand

In recent years, Thailand has positioned itself as one of Southeast Asia’s most ambitious regulators in the digital-asset sector. Its latest policy shift — a temporary exemption from personal income tax on capital gains from cryptocurrency — marks a significant milestone in this broader strategy. By eliminating capital gains tax for individual crypto investors under specific conditions, Thailand is seeking to balance innovation with oversight, encouraging growth in a regulated digital-finance ecosystem.

The exemption, introduced through a ministerial regulation in September 2025, applies from January 2025 through the end of 2029. During this five-year period, individuals who sell or exchange digital assets such as cryptocurrencies or tokens through licensed Thai digital-asset business operators are not required to pay personal income tax on the profits they realize. This effectively reduces the capital-gains tax rate on qualifying crypto transactions to zero. The policy also extends to value-added tax, removing VAT obligations for digital-asset transfers made through approved platforms. Together, these measures dramatically lower the tax burden on crypto investors, making Thailand one of the most crypto-friendly jurisdictions in the region — at least temporarily.

Importantly, the exemption is carefully structured to promote trading within Thailand’s regulated environment. Only transactions conducted through licensed exchanges, brokers, or dealers qualify for the tax benefits. Trades made on unlicensed or offshore platforms remain outside the exemption, preserving regulatory control and encouraging investors to move their activity onto domestically supervised infrastructure. The government’s aim is clear: strengthen its oversight of the digital-asset market while simultaneously making local platforms more attractive to users, investors, and international partners.

The tax relief focuses on individual investors, not corporations. While individuals enjoy a complete waiver on capital-gains tax, companies remain subject to corporate-tax rules. Similarly, the exemption covers gains from disposal of digital assets, but other forms of crypto-related income — such as mining revenue or staking rewards — may still fall under separate tax obligations. These distinctions underscore that Thailand’s goal is not blanket deregulation, but rather targeted incentives that direct activity toward regulated channels.

News from other countries:

• Bill Hill, co-founder and CTO of Samourai Wallet, has been sentenced in the U.S. to four years in federal prison for operating an unlicensed money transmission business — the Samourai mixing service — which U.S. authorities say facilitated the laundering of over $237 million in illicit funds.

• Japan’s Financial Services Agency (FSA) is planning an ambitious crypto tax reform that will reclassify 105 cryptocurrencies, including Bitcoin and Ethereum, as financial products under the Financial Instruments and Exchange Act, significantly lowering the effective tax rate on gains from up to 55% to a flat 20% — the same rate applied to stocks and bonds.

• The International Consortium of Investigative Journalists (ICIJ) found that major centralized cryptocurrency exchanges remain significant conduits for laundering dirty money, processing billions in illicit cash linked to organized crime, dark web operations, cyberattacks, and sanctioned entities.

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