Brazil on Tuesday laid the groundwork to regulate the country's cryptocurrency market, giving the green light to a bill that provides guidelines for virtual assets. The Brazilian Senate's Economic Affairs Committee unanimously approved the crypto bill, paving the way for a vote on the Senate floor, followed by the lower house. If the bill successfully passes through National Congress, President Jair Bolsonaro will consider signing the legislation into law.
- Brazilian lawmakers will vote on a bill to regulate the country's cryptocurrency market.
- The proposed bill defines what virtual assets are and outlines the responsibilities of crypto service providers.
- The legislation aims to increase crypto adoption and curb crimes associated with digital assets.
- Brazil continues to work toward developing a digital version of its local currency, the Brazilian real.
The implementation of crypto regulation in Brazil would see Latin America's largest country join others in the region setting clear guidelines and rules governing the emerging asset class. El Salvador famously became the first country in the world to recognize Bitcoin as legal tender in September 2021, even giving citizens $30 in Bitcoin for downloading its national digital wallet. Meanwhile, Cuba last year announced that it plans to recognize and regulate cryptocurrencies such as Bitcoin, citing "reasons of socio-economic interest."
What the Bill Covers
The proposed bill starts with the basics, such as defining what virtual assets are and outlining the responsibilities of crypto service providers. It also proposes that the federal government determine which body enforces crypto regulations—expected to be the Central Bank of Brazil (BCB), according to Senator Irajá Abreu, the draft's rapporteur.
Abreu, who initially proposed the bill in 2019, told Bloomberg that the bill's successful passage would see increasing adoption and popularity of cryptocurrencies in the country. "Once this regulation is approved, the trend is that it will be increasingly adopted in the supermarket, in commerce, in a car dealership," he said.
Focus on Curbing Crypto-Related Crime
Abreu also noted that regulatory clarity would help curb crimes associated with crypto assets. "The intention of the project is to curb or restrict illegal practices, such as money laundering, tax evasion, and many other crimes. There is a market that is licit, legal, which is the vast majority of this market, but there are exceptions."
The bill proposes that virtual asset service providers have anti-money laundering (AML) systems and monitoring to prevent illicit use and concealment of crypto-assets while also introducing imprisonment and fines for breaching crypto laws. In July 2021, Brazilian authorities seized R$172 million ($33 million) linked to a money-laundering investigation involving cryptocurrency exchanges.
In addition to proposed crypto legislation, Brazil, like several other countries, continues to work toward developing a central bank digital currency (CBDC) of its local unit—the real. The BCB hopes to run a pilot program later this year before launching a final version of the digital real in 2024.
Central bank digital currencies are digital tokens, similar to cryptocurrency, issued by a central bank. They are pegged to the value of that country's fiat currency. Many countries are developing CBDCs, and some have even implemented them into their financial systems.