After seven years of working on a crypto law, Brazilian politicians have finally approved the law. The next and last step is a signature from the president.
The question is whether this will become part of the legacy of outgoing president Jair Bolsonero, or one of the first new laws under Luiz Inácio Lula da Silva. Bolsonero is president of Brazil until December 31.
Bitcoin is a digital representation of value
Tonight there was a vote on the proposal in Brasilia, the capital of the country. One of the most important parts is that the new rules recognize Bitcoin as a digital representation of value that can be used as a means of payment and investment.
Mind you, this does not make Bitcoin or any other cryptocurrency legal tender in the country. Bitcoin and crypto may be used as a means of payment, but this does not mean that the law forces shops to accept Bitcoin.
Who oversees the market?
In addition, the bill charges the executive branch with selecting government agencies to oversee the market. It is expected that the Central Bank of Brazil (BCB) will be in charge when Bitcoin is used as a means of payment, while the Securities and Exchange Commission (CVM) will be the watchdog when it is used as an investment vehicle.
Both the BCB and the CVM and the national tax authorities helped politicians and legislators to draft the new laws.
The idea behind these new rules is to define cryptocurrency and their service providers, and to help protect against money laundering and fraud.
Changes to the proposal
The bill gained momentum after Brazil’s Senate approved a version of it in April, but was delayed. It took a few months as the bill sat in the Chamber of Deputies awaiting a decision after several amendments were made to the bill.
One of the most discussed topics had to do with a provision that would require crypto exchanges to follow certain guidelines for segregating client funds. So an exchange should distinguish between their own Bitcoin and the Bitcoin they hold for their users.
This clause is intended to protect users in the event of bankruptcy of a crypto company, such as recently FTX or BlockFi. Even after bankruptcy, users would at least get their coins back. Certainly doesn’t sound bad, but this part was rejected and will most likely be added later.
Another item was dropped from the proposal, namely a tax cut for the purchase of Bitcoin mining machines. The idea was to give a discount to Bitocin miners who use renewable energy sources.
Brazil has a large crypto market
Regulating the crypto industry is a hot topic in Brazil due to the size of the market and the number of scams the country has seen in recent years. One of the most high-profile cases came to light when police seized nearly $28 million over a crypto pyramid scheme.
Brazil ranks seventh on Chainalysis’ latest Global Crypto Adoption Index. The blockchain analytics firm calculated that the South American country received nearly $142.7 billion in cryptocurrency between July 2021 and June 2022.