The Board of Trade of the State of São Paulo (“JUCESP”) consulted the Ministry of Economy in order to clarify the use of cryptocurrencies in corporate operations or for the payment of the corporate capital of companies in Brazil. Such consultation was answered through Circular Letter 4108/2020, of December 1, 2020.

JUCESP raised three questions: (i) legal nature of cryptocurrencies (currency, security, or intangible asset with or without economic value); (ii) existence of a legal prohibition for payment of companies' corporate capital through cryptocurrencies; and (iii) formalities that must be observed to register corporate acts involving cryptocurrencies.

Regarding the first question, the Ministry of Economy ratified the understandings of the Central Bank of Brazil, the Securities and Exchange Commission and the Federal Revenue Service, in the sense that cryptocurrencies are financial assets that are not to be confused with 'electronic currency' (Law 12.865/2013) and which, depending on the context, may represent securities, as further detailed here.

The Ministry of Economy stressed that there is no legal prohibition for the use of cryptocurrencies in corporate operations or payment of corporate capital. The capital of the company can comprise any kind of assets, as long as they are susceptible to pecuniary valuation, pursuant to article 997, item III and 1.005 of the Civil Code and articles 7 and 8 of Law 6.404 / 1976, Corporations, an appraisal report is required.

Thus, as payment of corporate capital with cryptocurrencies are subject to the same rules as any movable assets, there are no specific formalities to be observed for the registration and filing of these corporate acts.

Although the Circular Letter 4.108/2020 did not analyze aspects related to international transactions involving the payment of corporate capital with cryptocurrencies by foreign shareholders/quotaholders non residents in Brazil, in our view, the conclusions of the Ministry of Economy would also be applicable to such cross-border transactions.

In our view, individuals and legal entities residents in Brazil would be, in principle, authorized to transfer cryptocurrencies as payment of corporate capital at fair market value or respectively (i) at acquisition cost; or (ii) at book value; in which case the transaction may, or not, be subject to capital gain taxation.

Finally, it is worth mentioning that depending on the specificities of the transaction and who effectively held the custody of wallet of origin, the shareholder/quotaholder resident in Brazil might be required to report to the Brazilian tax authorities (RFB) the transfer of its cryptocurrencies to the legal entity, under the terms of item II, letter “b” combined with paragraph 2, item IX, of article 6th, of Normative Instruction RFB nº 1.888/2019.

We are at your disposal for any further clarifications regarding the possible practices with cryptocurrency.