Bloomberg — Brazilian President Jair Bolsonaro has signed into law the country’s first framework for cryptocurrency, which sets out ground rules for brokerages that offer crypto, as well as for the assets’ day-to-day use.
Though a formal designation is needed, the central bank is likely to be responsible for regulating and overseeing the new structure, according to the bill’s rapporteurs — the lawmakers who make changes to the original proposal — in the senate and the lower house. Companies that provide crypto will have at least six months to adapt.
The law, published Thursday in the official federal gazette, defines crypto as the digital representation of an asset that can be traded, transfered and used for payments or investments. Crypto providers are subject to laws preventing money laundering and concealment of assets as well as against financing of terrorism, criminal organizations and the proliferation of weapons of mass destruction. Authorities can impose jail time for those who fail to comply.
Lawmaker Expedito Netto, the bill’s rapporteur in the lower house, said in late November that the proposal had the backing of both the current Bolsonaro government and the incoming administration of Luiz Inacio Lula da Silva, who is still nominating ministers. Discussion of the measure in Brazil’s congress picked up after FTX, one of the world’s biggest crypto exchanges, collapsed last month. That implosion has also fueled debate over hammering out crypto regulation in the US.
The law “was something we all wanted, not only the crypto industry but investors as well,” said Julien Dutra, director of government relations at 2TM, the holding company that owns brokerage Mercado Bitcoin. In his view, it’s a step that will boost private investment in the domestic crypto market.
The Brazilian Association of Cryptoeconomics, which represents domestic companies in the sector, praised the new law in a statement, calling it “extremely important” in building “clear rules” and responsibilities for its firms.
It also may give investors more security by laying out the responsibility of brokerages and clarifying proper channels for investigation and punishment.
The announcement comes as Brazil’s central bank is working on a digital version of the country’s currency, the real, aimed at promoting investments rather than commercial use.
Dutra expects the law’s regulations, which now need to be outlined, to add rules on capital segregation, a point left out of the measure after intense debate among lawmakers. Brazilian companies wanted investor money to remain off brokerage firms’ balance sheets to avoid insolvency problems that might arise due to cases of excessive leverage. But the lower house decided to scrap this article, saying it would be better to leave it to the central bank to detail.
Netto explained that capital segregation isn’t required of Brazilian banks. He also chose to drop from the law’s text a requirement for brokerages to have their headquarters in the country. He said he doesn’t want to create a separate market excluding some players.
Read more at Bloomberg.com