Brazil Lets Judges Seize Crypto from Debtors

Brazil Lets Judges Seize Crypto from Debtors

Brazil has been progressively integrating cryptocurrency into its financial and legal systems, with adoption surging, ranking second in Latin America for “crypto value received” per a 2024 Chainalysis report, as mentioned in Cointelegraph. Despite lacking a comprehensive regulatory framework, with the central bank dividing processes into phases, legislative proposals like Bill 4.420/2021 from 2023 sought to protect crypto as part of debtors’ savings, per Cointelegraph, published on September 20, 2023, though not directly cited here. This ruling, however, focuses on seizure, not protection, showing a dual approach.

The ruling, from the Third Panel of the STJ, was unanimous and examined a case brought by a creditor seeking repayment, as reported in Cointelegraph and Cryptopolitan, both published on April 4, 2025. The STJ’s memo, translated and published on its website, states, “Although they are not legal tender, crypto assets can be used as a form of payment and as a store of value,” confirming the decision. Minister Ricardo Villas Bôas Cueva, part of the five-person panel, noted that while Brazil lacks formal crypto regulation, bills recognize them as “digital representations of value,” per the Cryptopolitan article.

Under existing Brazilian law, judges can freeze bank accounts and authorize fund withdrawals without notifying the debtor, as per the Civil Code (CPC), and this ruling extends that power to crypto assets held on exchanges. The process involves judges sending letters to cryptocurrency brokers, informing them of intent to seize an account holder’s assets to repay creditors, as seen in TradingView, published on April 4, 2025.

An earlier related development, from February 26, 2025, shows São Paulo courts beginning to freeze crypto assets, with recovery challenges, per Valor International, suggesting this STJ ruling clarifies and expands that practice.

Practical Implications for Seizure

The ruling likely applies to crypto assets held on centralized exchanges within Brazilian jurisdiction, where exchanges can be legally compelled to comply, such as Binance Brazil or local platforms. However, for decentralized or self-custodial wallets, seizure might be more complex, as there’s no intermediary to notify, and debtors might not disclose wallet details. The STJ’s decision doesn’t specify how to handle such cases, but given existing laws, courts might order debtors to provide access, though enforcement could be challenging, as noted in community discussions on X (Crypto Lawyer on X).

The process mirrors bank account seizures, where judges can freeze funds without notice, and exchanges are expected to cooperate, potentially under threat of legal action if they don’t, aligning with Brazil’s regulatory push, per Crypto Regulation in Brazil | Chainalysis, published on October 15, 2024, though not directly cited here. https://crypublishx.com/ethereum-sets-pectra-mainnet-launch-for-may-7/