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The Central Bank of Brazil’s (BCB) proposed changes to international payment and transfer services would bring the fast-growing sector under tighter supervision, raising compliance costs but potentially strengthening the system’s credibility.
The central bank is seeking feedback on proposals intended to level the playing field between fintechs and traditional institutions.
The objective is to strengthen customer safeguards and improve the traceability of cross-border fund flows.
Under the draft rules, only institutions authorised by the BCB would be allowed to offer so-called “eFX” services.
Providers currently operating without authorisation, many of them app-based remittance and currency-exchange platforms, would need to apply for a payment institution licence within a transition period set by the central bank.
Levelling the playing field
The BCB is responding to the rapid expansion in the number of fintechs and non-bank operators in the country, which currently benefit from a lighter-touch regime.
By tightening authorisation requirements and reporting duties, the regulator aims to establish a more level regulatory framework.
Under the central bank’s plans, authorised firms would have to notify the BCB in advance of their intention to provide eFX services and submit monthly reports on transactions and movements in reais.
The proposed exclusive deposit account for receiving and delivering reais to customers is designed to keep client funds separate and more easily monitored.
The consultation also signals that the BCB is seeking not only tighter control, but also clearer rules for legitimate financial flows. It proposes expanding the scope of eFX to include transfers related to investments in Brazil’s financial and securities markets, capped at $10,000 per transaction.
Providers would be required to disclose the total effective value (VET) of each exchange transaction, as well as the total cost in reais per unit of foreign currency. This aims to address issues with opaque pricing and hidden fees.
End-to-end regulation
The BCB is also seeking input on whether eFX services could be offered through banking-as-a-service (BaaS) platforms, in a move that could bring the rapidly growing infrastructure segment under similar controls.
This signals that the central bank may be looking to regulate the infrastructure layer of eFX, not just the customer-facing providers.
If BaaS platforms are brought within scope, the companies supplying accounts, payment rails and FX capabilities to fintechs could be subject to the same licensing, reporting and fund segregation requirements as front-end firms.
This would also erode the regulatory shield that many small apps rely on, given that they can at present outsource regulated activity to a licensed partner. Under direct oversight, both the platform and its clients might have to demonstrate compliance or rethink their business models.
Tighter controls would likely increase compliance costs for BaaS providers and their customers.
However, they would also give the BCB much greater visibility into who is moving funds, enhancing the segment’s credibility and benefiting providers in the long term.
