Although Brazil did not declare Bitcoin to be the legal currency, it took the next best action by allowing cryptocurrencies as a form of payment nationwide. This provided a legislative boost to the ecosystem’s growth and adoption of digital currencies.
A legal framework allowing the use of cryptocurrencies as a form of payment in Brazil was adopted by the Chamber of Deputies.
The legislation, signed under the code PL 4401/2021, includes virtual currencies and frequent traveler incentives from airlines (popularly known as “miles”) in the category of “payment agreements” subject to supervision by the country’s Central Bank.
The law, which has already been adopted and just needs the President of the Republic’s signature to become effective, gives cryptocurrency payments for goods and services legal standing but does not elevate them to the level of legal tender.
Brazil has made great progress in terms of investor adoption and cryptocurrency legislation. The majority of the country’s main banks and brokers presently offer some form of exposure to cryptocurrency investments or comparable services like custody or token offers, and it currently has the most cryptocurrency ETFs in Latin America. Even Itaú, one of the biggest private banks in Brazil, is attempting to tokenize assets as a component of its upcoming suite of services for investors.
The entity or office in charge of overseeing the matter will be decided by the executive part of the government (the president and its ministers) after the law is put into effect; only tokens classified as securities fall under the purview of the CVM, Brazil’s version of the SEC.
The CVM and the nation’s own Central Bank have been the government organizations most active in the field up until this point. The law also specifies guidelines for how bitcoin exchange platforms should run as well as for the custody and management of cryptocurrencies by reputable third parties.
The law makes no mention of the issuance of a central bank digital currency; yet, the country has already made great headway in this direction.
One of the most crucial components of the legislation is the requirement for service providers to keep their money separate from those of their consumers to avoid a situation similar to that of FTX, in which the exchange utilized its clients’ cash for its financial operations.
The law avoided a provision that would have granted cryptocurrency miners tax breaks, and it also acknowledged that digital currencies assisted illegal operations due to their anonymity, calling for “better oversight” of the industry.
