What is the Content of Brazil’s Congressional Bill?
Crypto enthusiasts globally have been excited about the bill proposed by Brazil’s Congress, which calls for regulation of the crypto industry to facilitate crypto payments within the country.
This bill is expected to increase crypto adoption not just in Brazil, but across Latin America. The regulatory framework under discussion is identified as PL 4401/2021.
Unlike El Salvador, Brazil does not recognize cryptocurrency as legal tender. The bill does not change this stance but aims to integrate digital assets, including frequent flyer programs, into the country’s payment system under the oversight of Brazil’s Central Bank.
How Does Crypto Payment Function?
This legislation opens the doors for Brazil and the broader region to take advantage of cryptocurrency payments. Cryptocurrency operates through a peer-to-peer system, enabling individuals to send and receive funds without needing third-party validation.
Transactions are verified and recorded on a blockchain, a publicly distributed ledger. Although cryptocurrency is intangible, it acts as a key that facilitates these transactions without requiring an intermediary.
Consequences of the Bill’s Approval
The bill will become law once signed by Brazil’s President, granting crypto the status of a legitimate payment method for goods and services. This would enable banks to integrate crypto payments, similar to how credit cards are used today.
Furthermore, the bill will grant access to the global crypto industry, facilitating the issuance of licenses for crypto exchanges and encouraging third-party crypto custodial services. Once enacted, these exchanges and custody services will be required to establish a legal entity in Brazil to operate. It is possible that existing crypto firms will be given a grace period to comply with the new regulations.
FTX’s Impact
The collapse of the FTX exchange has highlighted the need for clear separation between a company’s funds and its clients’ assets. FTX’s downfall occurred due to a liquidity crisis triggered by a “bank run,” with the exchange using customer funds for its own operations without holding sufficient assets to back these transactions.
The executive branch of the Brazilian government will determine the agency responsible for overseeing the crypto industry once the President signs the bill. Notably, tokens classified as securities will continue to be regulated by Brazil’s Securities and Exchange Commission (CVM), one of the key public agencies overseeing the crypto space, alongside Brazil’s Central Bank.
Brazil’s Role in Global Crypto Progress
Crypto adoption in Brazil was already gaining traction before the introduction of this new bill. Several banks, including a subsidiary of the multinational financial giant Santander, offer crypto custody services, and there are plans to launch crypto trading services in Brazil. Brazil’s long-standing private bank, Itau, which was established in 1945, is set to introduce an asset tokenization platform to boost crypto activity in the country. However, despite these advances, no company is currently offering crypto payment services within Brazil.
Potreba za regulated crypto payment services is expected to strengthen Brazil’s position in the crypto ecosystem and attract established global crypto firms. Brazil leads Latin America with the most crypto ETFs, and its major banks are advancing crypto through investments, token offerings, and custodial services.
It’s exciting to see emerging economies like Brazil embracing crypto technology. Despite the ongoing bear market and the FTX collapse, cryptocurrency continues to gain momentum in the mainstream.
