Learn about the key changes brought by the bill approved by Congress and their impacts on the Brazilian crypto market.
In late 2022, the Brazilian Congress approved the bill that regulates the crypto market in Brazil. The text approved brings ideas, resolutions and guidelines for the provision of services related to virtual assets, such as payments in cryptocurrencies. The regulation will be further deliberated upon by organs that will formulate the processes for its implementation. The Central Bank of Brazil (BCB) and the Securities and Exchange Commission of Brazil (CVM) will most likely get this task. Around the world, at least 27 countries are formulating own regulations.
So far, there was no specific legislation for virtual assets in Brazil, but this did not hamper the growth of this market. Moving forward, companies must comply with the issues covered by this regulation:
Operational security was mentioned in a special chapter, which highlights the need for anti-money laundering mechanisms (AML), terrorism financing and the proliferation of weapons of mass destruction, in line with international standards.
Companies operating in the crypto segment, such as exchanges, now need a license to operate in the country, as is required for financial institutions. They must also obtain the legal entity registration number in Brazil (CNPJ). Another requirement is that suspicious activities must be reported to the Council for Control of Financial Activities (COAF).
To prevent money laundering, virtual asset service providers must keep updated records of clients (KYC – Know Your Client), as well as the records of operations and transactions involving the management of virtual assets (KYT – Know Your Transaction).
The new rules also determine that companies must adhere to the Consumer Defense Code. Investments or payments in cryptocurrencies now must obey the Brazilian Penal Code, the Law on Prevention of Money Laundering, as well as the Law on Crimes Against the National Financial System. In other words, frauds and crimes will attract clear penalties according to the legal framework.
According to the Brazilian Association of Crytoeconomics (ABCripto), the regulatory framework is extremely important. Besides supporting the rules about obtaining CNPJ and the obligation to report suspicious activities to the regulatory bodies, ABCripto also proposes other details, such as the segregation of the assets of clients and those of the exchange, which are not part of the regulation currently approved.
The bill was signed into law by the President of Brazil on December 21, 2022 and, according to the text approved by Congress, the new regulation will take effect between May and June 2023 – 180 days after the enactment of the law. From that moment on, the authority designated to create and supervise compliance with the rules will have six months to announce the licensing rules. It is expected that the first duly regulated exchange in Brazil starts to operate only in 2024.
While we are aware of the complexity of creating and implementing the operations and processes to control the crypto market – which is global and decentralized -, there are specialists who believe that the legal framework offers greater security to the sector and may attract new investors. Currently, nearly 5% of the Brazilian population (10.4 million) invest in crypto assets.
Also, new solutions are expected for receipt of payments in cryptocurrencies, making digital assets one more payment option for e-commerce purchases, for example. In other words, in a payment gateway, cryptocurrency would be an option just like Pix and credit and debit cards.
Cooperation is essential between companies, governments and other institutions interested in developing this market – for both payments and investments – since it is not a trivial issue and does not have a short-term resolution; however, these efforts could result in the development of new technologies and drive innovation.