On 13 September 2024, Brazil’s Central Bank officially published Resolution BCB 410/2024. The Resolution amends Resolution 278/2022, which is the key regulation addressing foreign capital, foreign loans and foreign direct investments in Brazil. The Resolution came into force on 1 October 2024.
Resolution BCB 410/2024 clarifies that all transactions involving the payment for newly issued shares by, and sales to, non-residents using virtual assets must be registered in the Central Bank’s database (inbound transfers). The same registration obligation applies to outbound transfers to non-residents, including the payment of dividends, interest on net equity (juros sobre capital próprio), capital returns and distributions on liquidation.
The changes were made to prevent arguments over whether virtual assets (in particular, virtual currency) were to be considered neither “tangibles” nor “intangibles” under the existing wording of Resolution 278/2022, and therefore outside its scope.
Note that Brazilian law still does not allow for shares to be paid up by the provision of services.
Transactions that are not automatically registered under the Central Bank’s SCE-IED system (the database used for the registration of information relating to foreign direct investments) must be registered by the person appointed by the non-resident party for this purpose.
Practical use cases
The following scenarios illustrate when Resolution BCB 410/2024 is likely to be relevant in practice.
Capitalising a Brazilian subsidiary with virtual assets. A foreign investor wishing to subscribe for shares in a Brazilian company using virtual currency (for example, a stablecoin or another virtual asset) must ensure that the transaction is registered in the SCE-IED system. Without registration, the foreign investor will not be able to repatriate dividends or capital in the future. This is now expressly addressed by the Resolution, removing the uncertainty that previously existed about whether virtual assets qualified as a permissible form of capital contribution under Resolution 278/2022.
Paying dividends or interest on net equity in virtual assets. A Brazilian company with non-resident shareholders that distributes dividends or pays interest on net equity in virtual assets must register the outbound transfer in the SCE-IED system. This applies regardless of whether the virtual assets are transferred directly or converted into currency at the point of remittance.
Returning capital or making distributions on liquidation. Where a Brazilian company is wound up and distributes its residual assets (including virtual assets) to non-resident shareholders, the distribution must be registered as an outbound transfer. The same applies to any return of capital to non-residents during the company’s life, for instance in connection with a capital reduction.
Sale of shares by a non-resident to another non-resident. Where a non-resident sells shares in a Brazilian company to another non-resident and part or all of the consideration is paid in virtual assets, the transaction falls within the registration requirement. Failure to register may affect the ability of both parties to make future remittances to and from Brazil in connection with the investment.
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