Although Brazil did not declare Bitcoin to be legal tender, it took the next best action by legalizing cryptocurrencies as a form of payment nationwide. This gave the ecosystem’s growth and adoption of digital currencies a regulatory boost.
A legal framework allowing the use of cryptocurrencies as a form of payment in Brazil was adopted by the Chamber of Deputies.
The agreement—signed under the designation PL 4401/2021—allows for the inclusion of digital money and frequent flyer miles (often referred to as “miles”) in the definition of “payment agreement” subject to the control of the nation’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 advanced significantly in terms of investor adoption and regulation of cryptocurrencies. 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 Ita, 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.
Despite the fact that the legislation is silent on the subject, the nation has already taken substantial strides toward the issuing of a central bank digital currency.
To avoid a situation similar to FTX, where the exchange utilized its clients’ cash for its own financial operations, one of the most crucial components of the rule requires service providers to keep their own funds separate from those of their consumers.
The law eliminated a clause that would have given tax breaks to cryptocurrency miners and called for “tighter oversight” of the sector, acknowledging that the anonymity of digital currencies enabled illegal activity.