Brazil Legalizes Crypto Payments, 'Setting the Stage for Greater Bitcoin Adoption'
Jair Bolsonaro, the President of Brazil, has signed a bill that legalizes and regulates Bitcoin (BTC) and other cryptocurrencies as a payment option in the country.
Bolsonaro signed a bill into law that established the country's official and complete framework for the trading and use of “virtual currencies” in Brazil, per the federal government’s official journal. The bill, previously approved by Congress, was signed on Wednesday and published on Thursday.
It stated that,
"For the purposes of this Law, a digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes is considered a virtual asset."
Therefore, this does not include national and foreign currencies, electronic currencies, instruments that provide certain benefits and services (such as points and rewards from loyalty programs), and securities and financial assets.
Virtual asset providers (VASPs) are defined as entities that execute, on behalf of third parties, at least one of these services: exchange between virtual assets and national or foreign currency, or between one or more virtual assets; transfer of virtual assets; custody or administration of virtual assets or of instruments that enable control over these assets; and the participation in financial services and offering of services related to the offer by an issuer or the sale of virtual assets.
The document added that,
"Virtual asset service providers may only operate in the country with prior authorization from a federal public administration body or entity."
Brazil’s residents will not be able to use cryptoassets as legal tender in the country.
When it comes to illegal acts involving crypto, the bill stated that the perpetrators would be punished with fees and up to eight years in prison.
"The penalty will be increased from 1/3 (one third) to 2/3 (two thirds) if the crimes defined in this Law are committed repeatedly, through a criminal organization or through the use of virtual assets," it added.
The new law will go into effect in 180 days from the date of its official publication.
The Central Bank of Brazil (BCB) and the Securities and Exchange Commission (known as the CVM) are expected to work together on overseeing the market but with distinct roles: the BCB would focus on crypto used for payments, while CVM would keep an eye on crypto used as an investment asset. However, the government bodies that would act as overseers are yet to be selected.
As reported earlier in December, Brazil’s Central Bank “published a resolution” that created an “interdepartmental working group” focused on tokenization. This group would “eventually propose regulatory amendments” pertaining to the “registration, custody, trading and settlement activities of financial assets that use blockchain-powered technology.”
When it completes its meetings program in 2023, the group will prepare a “final report,” which will be presented to the bank’s Governance, Risks, and Controls Committee.
While the BCB is not exactly crypto-friendly, the CVM was previously keen to pursue a laissez-faire attitude to crypto regulation but has in recent months reversed this policy – and instead wants to start policing the sector.
Greater Bitcoin adoption in LATAM
Alex Adelman, CEO and co-founder of Bitcoin rewards app Lolli, said in a comment shared with Cryptonews.com that,
"Brazil’s move to regulate Bitcoin as a payment mechanism sets the stage for greater Bitcoin adoption in the country and Latin America at large."
Per Adelman, crypto adoption in Latin America continues to rise, going up by 40% in 2022. A major part of the reason, the CEO suggests, is inflation, which grew in this region at its fastest pace in over 15 years at an average of some 19%. Argentina and Venezuela have seen many of their citizens turning to crypto, given that, despite volatility, Bitcoin has increased in value, while these countries' fiat currencies continue to depreciate.
Adelman argued that "Inflation is a key factor driving demand for crypto as a payment in Brazil. [...] Countries with significantly higher inflation than Brazil have an equal if not greater potential to benefit from Bitcoin as an anti-inflationary, decentralized store of value."
The CEO explained that Brazilian inflation stood at just over 6%, while over 100 countries in the world are seeing much higher inflation than that.
Therefore, Brazil's neighboring countries may decide to follow its move, with Adelman saying that,
"As one of the largest economies in the world and a trade leader in Latin America, Brazil’s use of Bitcoin as both a store of value and a medium of exchange also suggests that neighboring economies will soon adopt similar laws to facilitate cross-border commerce."
He argued that countries that have large unbanked populations would benefit from using Bitcoin to eliminate dependence on banks, as anyone with an internet connection would have access to financial resources. "In 2023, we will continue to see more countries with high inflation in Latin America and beyond adopt Bitcoin for payments and as a currency," Adelman concluded.
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