Brazilian President Jair Bolsonaro has signed legislation making Bitcoin (BTC) and other cryptoassets a legal and regulated payment option in the country, and the move, according to one expert, “lays the groundwork for greater Bitcoin adoption.”
Bolsonaro signed a law that established the country’s official and comprehensive framework for trading and using “virtual currencies” in Brazil, according to the federal government’s official gazette. The law, previously approved by Congress, was signed on Wednesday and released on Thursday.
He said
“For the purposes of this Act, a digital representation of value that can be traded or transmitted electronically and used for payment or investment purposes is a virtual asset.”
Therefore, domestic and foreign currencies, electronic currencies, instruments that offer certain benefits and services (e.g. points and rewards from loyalty programs), as well as securities and financial assets are excluded from this.
Virtual Asset Providers (VASP) are defined as companies that provide at least one of the following services on behalf of third parties: exchange between virtual assets and national or foreign currency or between one or more virtual assets; transfer of virtual resources; custody or management of virtual assets or tools that allow control of such assets; and participate in financial services and offer services in connection with the offer or sale of virtual goods by an issuer.
The document added,
“Virtual asset service providers may only operate in the country with the prior approval of a federal government agency or entity.”
Residents of Brazil cannot use cryptocurrencies as legal tender in the country.
As for illegal acts involving cryptocurrencies, the draft law stipulated that the perpetrators would be punished with fines and up to eight years in prison.
“The penalty is increased from 1/3 (one third) to 2/3 (two thirds) if the crimes envisaged by this law are committed repeatedly, through a criminal organization or through the use of virtual goods”, he added.
The new law will enter into force 180 days after its official publication.
That Central Bank of Brazil (BCB) and the Securities and Exchange Commission (known as CVM) are said to work together in market oversight, but with different roles: the BCB would focus on cryptocurrencies used for payments, while CVM would keep a close eye on cryptocurrencies used as assets. However, the government agencies that would act as overseers have yet to be selected.
As reported in December, the Central Bank of Brazil “released a resolution” establishing an “interdepartmental working group” to focus on tokenization. This group would “eventually propose regulatory changes” related to the “registration, custody, trading and settlement of financial assets using blockchain technology”.
At the end of its meeting program in 2023, the group will produce a “final report” to be presented to the bank Governance, Risk and Control Committee.
While the BCB isn’t exactly crypto-friendly, the CVM aimed to take a laissez-faire stance on regulating cryptocurrencies, but has reversed that policy in recent months and wants to start overseeing the industry instead.
Greater acceptance of bitcoin in LATAM
Alex Adelman, CEO and co-founder of the Bitcoin rewards app Stupidsaid in a comment shared with cryptonews. com the,
“Brazil’s move to regulate Bitcoin as a payment mechanism sets the stage for increased adoption of Bitcoin in the country and across Latin America.”
According to Adelman, the adoption of cryptocurrencies in Latin America continues to grow and will grow 40% by 2022. A large part of the reason, according to the CEO, is inflation, which has grown at the fastest rate on average in over 15 years in this region, around 19%. In Argentina and Venezuela, many of their citizens have turned to cryptocurrencies as the value of Bitcoin has appreciated despite the volatility, while those countries’ fiat currencies continue to depreciate.
Adelmann supported this
“Inflation is a key factor driving the demand for cryptocurrencies as a means of payment in Brazil. […] Countries with significantly higher inflation than Brazil have an equal, if not greater, potential to benefit from Bitcoin as a decentralized, anti-inflationary store of value.”
The CEO explained that inflation in Brazil is just over 6%, while more than 100 countries around the world have inflation much higher than that figure.
Thus, Brazil’s neighbors may decide to follow suit, with Adelman saying so
“As one of the largest economies in the world and a leader in trade in Latin America, Brazil’s use of bitcoin as both a store of value and a medium of exchange suggests that neighboring economies will soon adopt similar legislation to facilitate trade cross border.”
He argued that countries with large unbanked populations would benefit from using Bitcoin to eliminate reliance on banks as anyone with an internet connection would have access to financial resources. “In 2023, we will continue to see more high-inflation countries in Latin America and beyond adopting Bitcoin for payments and currency,” Adelman concluded.
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To know more:
– The Brazilian government wants to monitor cryptocurrencies and train prosecutors on how to deal with fraud
– The new regulations will not stifle the progress of Brazil’s cryptocurrencies, says the regulator
– Brazil’s eighth-largest city plans to allow residents to pay taxes in cryptocurrencies
– Record number of Brazilian companies holding cryptocurrencies – Bitcoin and Tether Lead Adoption
