Brazil has not designated Bitcoin as legal tender; however, it has done the next best thing: it has passed a law legalising cryptocurrencies as means of payment throughout the country. This gives a regulatory boost to the adoption of digital currencies and the expansion of the ecosystem. Brazil has not designated Bitcoin as legal tender.
The House of Representatives in Brazil has given its approval to a legislative framework that will make it possible for anyone to utilise cryptocurrencies like bitcoin and ether as a form of payment throughout the nation.
The document, which was signed under the code PL 4401/2021, provides for the inclusion of virtual currencies and frequent traveller rewards from airlines (the popular “miles”) in the definition of “payment agreements” under the supervision of the country’s Central Bank. This provision was made possible by the inclusion of the code.
The law, which has already been approved and needs only the signature of the President of the Republic to be enacted, gives payments in cryptocurrencies for goods and services the status of legal payments; however, it does not give cryptocurrencies the status of legal tender.
In Brazil, there has been significant progress achieved in terms of the regulation of cryptocurrencies and the use of cryptocurrencies among investors. It is currently the country in Latin America with the most cryptocurrency exchange-traded funds (ETFs), and the majority of the country’s major banks and brokers currently offer some type of exposure to cryptocurrency investments as well as similar services such as custody or token offerings. Additionally, it is the country that currently holds the title of having the most cryptocurrency ETFs. Tokenization of assets is something that even Ita, one of the biggest private banks in Brazil, is working on as part of its future offering of services to investors.
Only tokens that are classified as securities are subject to the jurisdictions of the CVM, which is Brazil’s equivalent to the Securities and Exchange Commission (SEC). Once the law is enacted, it will be up to the executive branch of the government (the president and its ministers) to determine the body or office that will be in charge of supervising the matter.
The country’s Central Bank and the CVM have been the governmental agencies that have been active in the region to the greatest extent up to now. In addition, the legislation specifies standards for the operation of cryptocurrency trading platforms, as well as for the services of custody and administration of cryptocurrencies by reputable third parties.
Despite the fact that the law makes no mention of any provisions regarding the issuance of a digital currency by the central bank, the country has already made significant headway in the matter.
In order to avoid a scenario like the one that occurred with FTX, in which the exchange used the money belonging to its customers for its own financial activities, one of the most essential aspects of the regulation is the requirement that service providers keep their own funds distinct from those belonging to their customers. This is one of the most significant aspects of the regulation.
The legislation did away with a provision that would have provided cryptocurrency miners with tax breaks. It also acknowledged the fact that the pseudonymous nature of digital currencies made it easier for criminals to carry out their activities and called for “closer monitoring” of the industry.