Brazilian lawmakers have approved a comprehensive regulatory framework for trading and using cryptocurrencies in the country.
Voted on Tuesday evening in Brasilia, the country’s capital, the new rules recognize bitcoin as a digital representation of value that can be used as a means of payment and as an investment asset in the South American nation.
The bill broadly applies to an area it calls “virtual assets,” and now only needs the president’s signature before becoming law. This does not make bitcoin or any cryptocurrency legal tender in the country.
The bill directs the executive to select the government bodies responsible for overseeing the market. The Central Bank of Brazil (BCB) is expected to be responsible when bitcoin is used as a means of payment, while the country’s Securities and Exchange Commission (CVM) will be the watchdog when it is used as an investment asset. The BCB and CVM, as well as the Federal Revenue Authority (RFB), assisted lawmakers in drafting the overhaul legislation.
Home to a vibrant cryptocurrency economy, Brazil has at times seen more citizens trading coins such as bitcoin than investing in the stock market. Now, the country is looking to set the stage for this to translate into more everyday use of financial transactions.
But not everything in the text is positive for the development of the market in the country. A big failure of Tuesday’s vote was the rejection of a clause to reduce certain state and federal taxes on purchases of bitcoin mining machines. While the text was restrictive enough –– the benefit would only apply to operations using renewable energy sources –– it was apparently not enough to pass.
Other provisions include the regulation of service providers such as exchanges, which will have to follow specific rules to operate in Brazil. The bill seeks to regulate the establishment and operation of bitcoin service providers in Brazil, defining such entities as those that provide trading, transfer, custody, administration, or sale of cryptocurrency for the third party account. Cryptocurrency service providers will only be able to operate in the country after explicit permission from the federal government.
One rule sought to require these companies to explicitly separate their wealth from capital held by customers –– for example, bitcoin, companies custody for users. The clause was intended to prevent events such as the one recently seen with FTX, where user funds were commingled with company funds, and to aid in the recovery of user assets in the event of bankruptcy. It was defeated in Tuesday’s vote.