- A new bill will allow cryptocurrency payments in Brazil.
- Crypto companies require federal clearance to operate.
- However, the bill does not make cryptocurrencies legal tender.
The Chamber of Deputies in Brazil has approved a regulatory framework that would allow citizens to utilize cryptocurrencies for payments. Virtual currencies are now included in the definition of “payment agreements” regulated by the country’s Central Bank, following the document signed under the code PL 4401/2021.
Drafted by deputy Auero Ruberio, the bill, which would regulate a broad category of financial instruments known as “virtual assets,” has passed both houses of Congress and just requires the President’s signature to become law. However, the bill does not make Bitcoin or any other cryptocurrency a legal tender.
The bill further gives the nation’s executive branch the responsibility of choosing government agencies to regulate the market. Cryptocurrency transactions are expected to be governed by the Brazilian Central Bank (BCB), while those involving investment will be supervised by the Brazilian Securities and Exchange Commission (CVM). Legislators received input from the BCB, the CVM, and the federal tax authority (RFB) as they drafted the reform legislation.
Service providers, such as exchanges, will also be subject to regulation under the new law. The bill’s goal is to set regulations for the licensing and operation of businesses in Brazil that facilitate cryptocurrency transfer, custody, administration, or selling on behalf of others.
In order to legally operate in the country, cryptocurrency service providers will need permission from the federal government. Businesses are given 180 days to comply with the new regulations before they are put into effect. The bill also introduces a punishment of two to six years in prison and a fine for fraudulent activities involving virtual currencies.
A vital component of the bill was that cryptocurrency service providers must separate their funds from their clients. The provision was intended to prevent situations like the recent FTX collapse, where the exchange used client funds for its own dealings. However, this proposal was rejected.