As recognition of the market capitalisation and popularity of cryptocurrencies in Brazil, where at least 3 million people are registered with cryptocurrency exchange platforms, the Brazilian Senate’s Committee on Economic Affairs approved bill PL 3.825/2019 that regulates digital currencies.
The need to classify cryptocurrencies as financial assets is twofold. Firstly, it will provide more stability in a notoriously volatile crypto market which could interfere with the current financial system’s stability, and secondly, it will prevent the illegal use of such assets, since the decentralised nature of cryptocurrencies means the technology often funds criminal acts.
Brazilian senators recognise that while the market is legal, regulation is necessary to combat global and domestic criminal activities. Senator Irajá, from the Social Democratic Party (PSD-TO), noted that “the bill’s intention is to curb or restrict illegal practices, such as money laundering, currency evasion and many other crimes in this segment”.
The bill places overarching duties on the Executive Branch, such as the obligation to appoint and task an institution with the responsibility of introducing a new compliance framework for cryptocurrency exchanges, in line with international standards. Additionally, it proposes a simplified procedure for providing operating licenses to activities related to cryptocurrency exchanges, as well as tax exemptions for companies that use 100% renewable energy to mine, process, and preserve virtual assets.
However, the bill also acknowledges that many of the regulatory frameworks related to digital currency operations must be defined by a proposed regulatory body. In any case, the proposal approved by the Senate is not imposing regulation on the market, but it is certainly urging the Executive Branch to do so in the upcoming months through this yet to be appointed – authority.
Following the Senate’s approval, the next step is the submission of appeals to the bill which will be considered by the Legislative Secretariat of the Federal Senate. So far, two amendments have been presented. The board is due to examine them and provide a verdict in the coming weeks.
This bill marks the beginning of a long period of debate surrounding financial regulation in Brazilian politics. This proposal is likely to have a tremendous impact on the role of cryptocurrencies, not only in Brazil, but in the whole of Latin America itself, as many governments in the region could seek to emulate Brazil’s actions and design their own regulatory frameworks for digital currencies.
Access Partnership is closely monitoring all development regarding cryptocurrency regulation in Latin America. For more information regarding this matter please contact Paula Rabacov at paula.rabacov@accesspartnership.com or Adrian Fossaceca at adrian.fossaceca@accesspartnership.com.
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