Approval by Brazilian senators of a bill to regulate financial transactions with virtual currencies, has been generally well-received by the crypto exchange market and industry experts.
The bill, known as the legal framework for cryptocurrencies, is considered balanced by most market players, although some experts have pointed out that specific rules and details are still lacking.
The bill is now going to the lower house of congress for a vote. If passed, it will be signed into law by President Jair Bolsonaro.
“The bill comes with the proposal of providing greater security to investors, users and avoiding tax evasion and money laundering. In this respect, it’s positive,” Fabiano Nagamatsu, crypto asset specialist, co-founder of Angel Investor Club and director of startup accelerator Inova Unigra, told BNamericas.
According to the text approved, a virtual asset is “a digital representation of value that can be traded or transferred by electronic means and used for making payments or for investment purposes.”
Among other items, the bill includes fraud using digital currencies in the country’s penal code. Last year, cases of this type of fraud grew by over 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 sets guidelines for infra-legal regulation, consumer protection and national defense issues. The text also states 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 agency of the federal public administration will be responsible for issuing authorizations and overseeing the segment.
Nagamatsu believes that as crypto exchanges will become financial institutions, they will likely come under the regulation of the central bank, but this remains unclear.
According to Brazilian internet association Abranet, the bill is an important development for the country’s financial sector.
The entity, which represents more than 400 companies that operate in ICT, internet and payments in the country, said that it supports the regulation of virtual assets, as the definition of concepts and governance “will provide legal certainty not only to the financial sector, but to the entire Brazilian population.”
The regulation comes at an opportune moment amid the increase in transactions with virtual assets and it could encourage more individuals to use new technologies in the market, Abranet said in a statement.
The new rules can also foster the development of the sector and the emergence of new technologies, the group added.
In this regard, the bill also provides for the “green mining” of cryptocurrencies, with benefits for cryptomining that have reduced environment impacts or use renewable energy sources.
The text also cuts taxes to zero on the import, industrialization or commercialization of machinery and software used for processing and mining virtual assets.
Daniel Cawrey, head of strategy at currency exchange Passfolio, said that regulation of the cryptocurrency market brings legal certainty to the sector, fosters innovation and can help curb fraud.
“Passfolio supports the regulation of the cryptocurrency market as there are often no punitive measures 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 significant for the market as a whole.
Marco Castellari, CEO of Brasil Bitcoin, said that the project will enable institutional investors to enter this market, stimulating development and the creation of jobs in the coming years.
Castellari 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 have to be careful that this and other bills do not get excessive to the point of making the companies’ operations unfeasible, as this would be harmful to the national economy,” he said in a statement.
Along the same lines, Antonio Neto, business development manager at crypto exchange FTX, said that the national regulation must take into account consumer-investor protections without stifling the development of new technologies.
He pointed out that Brazilian legislation should be in line with the principles discussed and accepted by other pro-innovation countries.
“Crypto assets bring financial freedom to all income tiers, allowing anyone to own digital assets. And this freedom presumes responsibility, both on the part of the government to prevent fraud, and of the investor to educate themself financially,” Neto said in a separate statement.
Nagamatsu told BNamericas that he expects that the new framework will eventually go into effect in around a year and a half, after all pending approvals are received, public consultations carried out and specific regulations drawn up.
