NORMATIVE INSTRUCTION 1.888/2019 OF THE FEDERAL REVENUE AND THE OBLIGATION TO PROVIDE INFORMATION ON CRYPTOACTIVE TRANSACTIONS
The Normative Instruction 1.888/2019 issued by the Federal Revenue and published in the DOU on 07/05/2019, aims to institute and discipline the obligation to provide information to the Special Revenue Secretariat regarding transactions carried out with cryptoactive assets.
Crypto-assets are nothing more than "virtual assets, protected by cryptography, present exclusively in digital records, whose transactions are executed and stored in a computer network", according to the concept available in the primer issued by CVM - Securities and Exchange Commission[1]. One of the best known species of crypto-assets are the bitcoins.
It so happens that cryptocurrencies are operated on the computer network and have a technology called blockchain, which consists of information recorded and grouped into blocks encoded by a password, which, when accepted on the network connect to the immediately preceding block, and so on, forming a sequence or chain of blocks.
The blocks are identified only by password (cryptography), and, because of this, it is not possible to identify the owner of the cryptocurrency, and for this reason, such operations are almost secret, even for government authorities.
In view of this, and taking into account the volume of transactions with cryptocurrencies and the growing demand of this market, the Federal Revenue Service understood that the regulation is necessary in order to allow the tax authorities to know the real data of the transactions with cryptocurrencies, since due to cryptography, such transactions are confidential.
It is important to clarify that transactions with cryptocurrencies are not taxable, given the impossibility of knowing the identity of the holder of the currency, which harms one of the pillars of the matrix rule of tax incidence, namely, the criterion of personality, which determines who will be responsible for the obligation.
Thus, as from the publication of the Instruction and within the periods provided for in Articles 8 to 9 of the aforementioned provision, individuals or legal entities which carry out transactions with cryptocurrencies, whose monthly value of transactions together or in isolation exceeds R$ 30,000.00 (thirty thousand reais), and also cryptoactive exchanges, all legal entities which carry out activities as defined by the Instruction itself in subsection II of Article 5, transcribed below:
A legal entity, even if non-financial, that offers services related to transactions carried out with cryptoactive substances, including intermediation, trading or custody, and that can accept any means of payment, including other cryptoactive substances.
The Normative Instruction also provides for penalties to be imposed on individuals or legal entities that fail to provide the information in the time and manner prescribed in the Instruction itself. What must be assessed is whether such penalties will be sufficient to ensure that those required to comply with the measure, given that this is their function.
It is clear from the mentioned Normative Instruction that the Federal Revenue Service intends to know the volume of cryptoactive transactions, and more than that, to identify the holders of these assets in order to assess possible taxation, which must be introduced by law, in accordance with the principle of legality.
The full Normative Instruction is available on the link