Brazilian Congress Set To Regulate Crypto Payments

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Brazil’s Congress today passed a bill that would regulate the use of cryptocurrency as a form of payment across the country, potentially giving a boost to the adoption of digital assets in the South American nation. .

Brazil’s Chamber of Deputies has approved a new regulatory framework signed under code PL 4401/2021 that will include digital currencies and airline frequent flyer rewards (the popular “miles”) in the definition of “payment agreements ” under the supervision of the country’s central bank.

The bill, which still requires the president’s signature, would give legal status to payments made in cryptocurrencies for goods and services, but would not grant them legal tender status.

This means that banks, if they wanted to, could soon start offering crypto payment services, making it easier to use crypto to buy and sell ordinary goods, in much the same way consumers currently use credit cards. or other similar services.

Some banks in Brazil are already experimenting with crypto custody today, such as the Brazilian subsidiary of Spanish banking giant Santander, which also plans to start offering crypto trading services. Other banks like Ita, one of the largest private banks in Brazil, are planning to launch their own asset tokenization platform. None, however, have yet developed a service to process crypto payments.

Brazil has made considerable progress in terms of regulation and investor adoption of cryptocurrencies. It is currently the country with the most cryptocurrency ETFs in Latin America, and most major banks and brokers in the country currently offer some type of exposure to cryptocurrency investments or similar services. like custody or token deals.

If the bill is signed into law, it will be up to the executive branch of government (the president and his ministers) to determine the body or office responsible for overseeing large tokens classified as securities under the jurisdiction of the CVM, L Brazilian equivalent of the SEC.

Until now, the public bodies most involved in the field were the country’s central bank and the CVM. In addition, the bill establishes rules for the operation of cryptocurrency exchange platforms, as well as custody and administration of cryptocurrencies by trusted third parties. If passed, it will require such companies to establish a legal entity in Brazil in order to conduct business in the country.

One of the most important aspects of the regulations is the requirement for service providers to segregate their funds from those of their clients to avoid a situation similar to that of FTX. The Bahamas-based crypto exchange founded by Sam Bankman-Fried collapsed earlier this month after a bank run on the exchange, and the resulting liquidity crunch revealed that the company did not hold individual reserves of client assets, and used instead to fund its own financial operations.

Editor’s Note: This article and its title have been updated for clarity.

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