In a newly published directive, Brazil announced a ban on cryptocurrency and credit cards for internet gambling transactions. Join us as we get the full scope of the new regulations that are part of a four-tier rollout over the next couple of months.
As part of a broader move to regulate its iGaming industry, South America’s largest economy, Brazil, has banned using credit cards and cryptocurrency for online gambling. The new rule was published by the Regulatory Policy of the Prizes and Betting Secretariat (SPA) in conjunction with the country’s Ministry of Finance. Published in Brazil’s Normative Ordinance No 615, the new regulations signify a new dawn in the iGaming industry for the South American giant.
The new set of iGaming industry guidelines comes after the passage of Bill 3626, popularly known as Law 14,790, which received the seal of approval from President Luiz Inacio Lula da Silva. Moreover, these updated directives also mark the launch of a wider four-part regulation rollout.
In addition to credit cards and cryptocurrency, payments transacted as cash, cheques, or slips will also be prohibited. Thus, payouts, wages, and withdrawals will only be processed through electronic transfers between the operators’ and the players’ accounts, all of which must be certified by the Central Bank of Brazil.
The rules also indicate that operators will be required not to accept payments from accounts not registered to the specific players using their platforms or from third parties. Additionally, players and operators cannot have intermediary parties in their operations. That said, the Central Bank of Brazil has been allowed to offer transactional accounts to bettors on specific circumstances.
Operators will also be required to implement policies that will relate to the management of liquidity risks. This entails calculating exposure limits and monitoring and mitigating the liquidity risk. It also includes having a contingency plan for additional resources. This will involve the maintenance of substantive financial reserves held in federal public bonds. These reserves must not fall below the R$5 million mark (~$953,597). On top of that, the accounts must also be separated from proprietary accounts, subject to annual renewal by the SPA.
The new laws also require that players receive a detailed analysis of their wagering habits. This will comprise their wagering history over the past 36 months. The report will also consist of the total value of players’ ongoing wagers and their overall financial standing. The primary purpose of providing players with this data is to enable them to steer their financial position from a gambling perspective.
On 21st December 2023, Brazil’s Chamber of Deputies voted to approve a bill that would form the bedrock of iGaming regulation in the country. For starters, the country’s Senate had removed the iGaming stipulation in the bill. This meant that had the Chamber of Deputies passed the bill as it was, then there would be no iGaming in the country. That said, the bill, in its final form, brought back iGaming, which was in line with President Lula’s high tax policies.
Bill 3626 maintained the original 18% tax on gross gaming revenue, which is considered exceptionally high compared to how other European, North American, and Asian jurisdictions tax the activity. Moreover, based on what industry experts say, when extra contributions are finally implemented, the already high tax percentage could shoot up to 31% and 34%. Even more restrictive, the bill also has a clause for levying an additional tax of 30% on prizes over the value of R$2.112 ($427). This specific clause has undoubtedly been received with outrage across the nation’s gambling industry, mainly because it adds more burden to an already hefty taxation model.
While some feared that the Senate’s refusal to adopt online casino gaming posed a real risk to the country’s gambling landscape, industry observers were relatively relaxed about it. The government had an initial revenue target of BRL 1.6 billion from taxing the industry. Meanwhile, the prospective removal of online casino gaming would have cost the country BRL 700 million, a substantial sum of taxable income that the regime could not afford to lose.
Brazil’s target is to hit a zero-deficit target in 2024, spurred by the taxes and license fees collected from its iGaming industry. 36% of the tax will be channeled towards sports, and 28% will be directed towards the country’s tourism sector. Finally, public Safety Initiatives, Education, and Security will receive 14% and 10%, respectively.
The calculation of inspection fees has also been changed. Previously, they were based on the amount of premium paid. However, under the new guidelines, they will be based on Gross Gaming Revenue. Operators must also apply for approval from the Brazilian Ministry of Finance to continue operating in the country. Operators in this South American jurisdiction will also need a Brazilian partner who holds a minimum of 20% of their company.
On top of that, this outlines that local operators must implement the appropriate security measures to protect players as they use their gaming platforms. These security measures include properly executing identification verification processes, potentially including facial recognition.
The regulations will be rolled out in four stages based on priority. Stage 1 will have a deadline of April 2024, Stage 2’s deadline will be May 2024, and Stage 3 will have until the end of June 2024. The final stage, stage four, will have a deadline of July 2024. The first stage, already being rolled out, will involve the publication of technical, payment, and security specifications that all operators must abide by.
The second stage of this regulation will see the SPA publish anti-money laundering and anti-terrorism financing policies. The second segment of the regulatory updates also entails publishing rules regarding player rights and compliance with other legal provisions. The third stage of the regulation rollout process will see the SPA publish the technical and security requirements for online gaming. This penultimate stage will also involve advertising regulations.
Finally, the last stage will involve allocating gambling resources to socially responsible causes. With such a strategic approach, especially regarding player protection, the Brazilian betting industry is primed to be one of the world’s biggest iGaming markets. Nonetheless, it remains to be seen how that will shape up in the face of these new regulations.
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