- Brazil has established a new regulatory framework that legalizes crypto for payment.
- The law allows you to buy and sell using crypto but does not consider it legal tender.
- The law covers the activities of crypto service providers and trusted third parties.
Brazil has become the latest country to recognize cryptocurrencies as means of payment. Industry players and experts consider this move a welcome development and a boost to the mainstream adoption of cryptocurrencies.
It is interesting to know that over the years, the country has continued to devise ways to actualize crypto’s full potential and the ecosystem’s expansion.
It is, therefore, reasonable at this juncture to identify the details of the newly approved legal framework for crypto in Brazil.
Brazil Legalizes Crypto Payment
Brazil’s chamber of Deputies approved the much-awaited regulatory framework legalizing cryptocurrencies as means of payment. The law, having been approved, is expected to be signed by the President of the Republic.
This newly approved regulatory framework implies that cryptocurrencies will now be recognized as legal means of payment in the country. However, the law does not recognize crypto as legal tender.
Furthermore, the newly approved regulatory framework is signed under code PL 4401/2021. The law provides for the inclusion of virtual currencies and frequent traveler rewards from airlines in the definition of “payment agreements” — under the supervision of the country’s Central Bank.
The law covers rules for the operation of cryptocurrency exchange platforms. The regulatory framework will guide exchange platforms that engage in trading and provide other crypto services.
Significantly, the law clearly states the obligation of crypto service providers in Brazil. They are expected to separate their funds from clients’ funds— to prevent a repeat of the FTX debacle, where the exchange used clients’ funds for financial operations.
The regulatory framework covers the services of custody and administration of cryptocurrencies by trusted third parties. Similarly, the law does not include a provision granting tax benefits to cryptocurrency miners. You would recall that some countries have regulatory frameworks that grant tax benefits to crypto miners. However, Brazil wants miners to pay as much tax as the electricity and power consumed.
Finally, when the President of the republic appends his signature, the executive arm— either the president or ministers— will determine the body or agency to provide oversight functions on cryptocurrencies. This is because the country’s CVM, the existing body, only has jurisdiction over tokens categorized as securities.
Crypto Adoption in Brazil
In recent times, Brazil has positioned itself as a crypto-friendly country. The country, via its Comissão de Valores Mobiliários (CVM), has continued to roll out favorable policies for the crypto ecosystem.
Interestingly, Brazil has the most cryptocurrency ETFs in Latin America. Similarly, most banks and brokers in Brazil now offer some exposure to cryptocurrency investments or similar services— like custody or token offerings.
Significantly, one of the largest private banks in Brazil, Itaú, is working on tokenizing assets as part of its future pack of services to investors. These and more are ways that Brazil has continued to embrace crypto and push for its mainstream adoption.