The approval by Brazilian senators of a bill to regulate financial transactions with virtual currencies has been generally well received by the cryptocurrency exchange market and industry experts.
The initiative, known as the legal framework for cryptocurrencies, is considered balanced among market players, although some experts have pointed out that specific rules and details are still lacking.
The bill will now go to the Chamber of Deputies for a vote. If approved, President Jair Bolsonaro will sign it into law.
“The bill comes with the proposal to provide greater security to investors, users and prevent tax evasion and money laundering. In this sense, it is positive,” Fabiano Nagamatsu, crypto asset specialist, co-founder of the Angel Investor Club and director of the accelerator, told BNamericas. startups Innovate Unigra.
According to the approved text, a virtual asset is “a digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes.”
Among other articles, the bill includes digital currency fraud in the country’s Penal Code. Last year, cases of this type of fraud grew more than 300%, and the number of operations carried out against crimes involving cryptocurrencies jumped from 16 in 2020 to 65 last year, according to data from the Federal Police.
The bill establishes guidelines on infralegal regulation, consumer protection and national defense. The text also establishes that the Federal Government will be responsible for authorizing the operation of virtual asset service providers.
However, it has not yet been defined which body or dependency of the federal public administration will be in charge of issuing the authorizations and supervising the segment.
Nagamatsu believes that once cryptocurrency exchanges become financial institutions they will likely come under central bank regulation, but this is unclear.
According to internet association Abranet, the bill is an important advance for the country’s financial sector.
The entity, which represents more than 400 companies that operate in ICT, internet and payments in the country, stated that it supports the regulation of virtual assets, since the definition of concepts and governance “will provide legal certainty not only to the financial sector, but also to to the entire Brazilian population.
The regulation comes at an opportune time amid the rise in virtual asset transactions and could encourage more people to use new technologies in the market, Abranet said in a statement.
The new rules may also encourage the development of the sector and the emergence of new technologies, the group added.
In this sense, the bill also provides for the “green mining” of cryptocurrencies, with benefits for crypto mining that have reduced environmental impacts or use renewable energy sources.
The text also reduces to zero taxes on the importation, industrialization or commercialization of machinery and software used for the processing and extraction of virtual assets.
Daniel Cawrey, chief strategist at stockbroker Passfolio, said regulation of the cryptocurrency market provides legal certainty to the industry, encourages innovation, and can help curb fraud.
“Passfolio supports regulation of the cryptocurrency market, as there are often no punitive measures in place to deter fraudsters. Something must be done to prevent and combat these criminals and the new legislation is a big step towards that,” Cawrey said in a statement.
According to the executive, legislation that “helps everyone feel more comfortable” about using virtual currencies without having to worry about fraud is very important for the market as a whole.
Marco Castellari, CEO of Brazil Bitcoin, indicated that the project will allow institutional investors to enter this market, stimulating development and job creation in the coming years.
He also said that because brokers will now be accredited and licensed, the risks of pyramid schemes and financial fraud should be greatly reduced.
“However, we must be careful that this and other bills do not become excessive to the point of making the operation of companies unviable, since this would be detrimental to the national economy,” he detailed in a statement.
Along the same lines, Antonio Neto, business development manager at crypto exchange FTX, said that national regulation must take into account consumer-investor protections without stifling the development of new technologies.
He pointed out that Brazilian legislation must be in line with the principles discussed and accepted by other pro-innovation countries.
“Crypto assets provide financial freedom to all income levels, allowing anyone to own digital assets. And this freedom implies responsibility, both on the part of the government to prevent fraud, and of the investor to educate himself financially,” Neto said in a separate statement.
Nagamatsu told BNamericas that he expects the new framework to come into effect in about a year and a half, after all pending approvals are received, public consultations are held and specific regulations are drawn up.
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