Stablecoin Tether ( USDT ) has seen a significant surge in adoption in Brazil, accounting for 80% of all cryptocurrency transactions in the country, according to data from Brazil’s revenue service agency. 

As of mid-October, USDT transactions in Brazil this year amounted to $271 billion Brazilian reais (~$55 billion), almost double the volume of Bitcoin ( BTC ) transactions in the country, which were $151 billion reais (~$30 billion). Stablecoins are cryptocurrencies designed to have a stable value, often pegged to the value of fiat currencies, like the U.S. dollar and the Brazilian real.

USDT transactions have been on the rise in Brazil since 2021, but crossed Bitcoin volume for the first time in July 2022, just at the peak of the crypto industry’s storm last year, when crypto lenders Three Arrows Capital and Voyager Capital collapsed.

Brazil’s USDT adoption soars in 2023, makes up 80% of all crypto transactions image 0 Top six cryptocurrencies by volume in Brazilian Reais. Source: Receita Federal 

The crypto winter slashed the volume of crypto transactions in the country by nearly 25% in 2022, ending at $154.4 billion reais, or ~$31 billion, the government reported.

The Brazilian tax agency tracks crypto-related activities of citizens using a sophisticated system that relies on artificial intelligence and network analysis. According to a blog post, the system is able to detect suspicious activity as well as trace the location of individuals trading cryptocurrencies.

The revenue agency is also targeting crypto investments held by the country’s citizens overseas. On Oct. 25, the local Congress passed legislation that recognizes cryptocurrencies as “financial assets” for tax purposes in foreign investments. Earnings overseas between 6,000 and 50,000 reais (~$10,000) will be subject to a 15% tax rate starting in January 2024. Above this threshold, taxes will be applied at 22.5%.

Since 2019, crypto exchanges operating in Brazil are required to disclose all user transactions to the government. Capital gains from crypto sales exceeding 35,000 reais (~7,000) per month are subject to a progressive tax bracket of 15% to 22.50%.

Global crypto exchanges such as Coinbase, Binance, Bitso, and Crypto.com operate in the country alongside local players such as Mercado Bitcoin and Foxbit.

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