Brazil legalizes crypto as a payment method

Brazil has not designated Bitcoin as legal tender, but it did the next best thing: it passed a law that legalized cryptocurrencies as legal tender across the country, giving a regulatory boost to the adoption of digital currencies and the expansion of the ecosystem.

Brazil’s Council of Representatives approved a set of regulations that legalize the use of cryptocurrencies as means of payment in the country.

The document – ​​signed under code PL 4401/2021 – provides for the inclusion of virtual currencies and rewards for frequent travelers from airlines (the popular “miles”) in the definition of “payment agreements” under the supervision of the country’s central bank.

The law, which has already been approved and only requires the signature of the President of the Republic to be adopted, gives legal status to cryptocurrency payments for goods and services – but does not give them the status of legal tender.

Brazil has made significant progress in terms of cryptocurrency regulation and investor adoption. It is currently the country with the most cryptocurrency ETFs in Latin America, and most of the country’s major banks and brokers currently offer some form of exposure to cryptocurrency investments or similar services such as custody or token offerings. Even Itaú, one of Brazil’s largest private banks, is working to tokenize assets as part of its future suite of services for investors.

After the law is in place, it will be up to the executive branch of the government (the president and its ministers) to determine the body or office in charge of overseeing the matter – only tokens categorized as securities fall under the CVM’s jurisdictions. Brazil’s equivalent SEC.

Until today, the public agencies most involved in the area have been the country’s own central bank and CVM. In addition, the law lays down rules for the operation of cryptocurrency exchange platforms, as well as services for the custody and administration of cryptocurrencies by trusted third parties.

The law does not mention any provisions regarding the issuance of a central bank’s digital currency; however, the country has already made significant progress on the matter.

One of the most important aspects of the regulation is the obligation of service providers to separate their funds from their customers to prevent a situation similar to FTX, where the exchange used its customers’ funds for its own financial operations. .

The law avoided a provision that gave tax benefits to cryptocurrency miners and also recognized that digital currencies facilitated criminal operations due to their pseudonymous nature, requiring “closer monitoring” of the industry.