Although Brazil did not declare Bitcoin (1) as a legal currency, it took the next best action by allowing cryptocurrencies nationwide. This gave the ecosystem's growth and adoption of digital currencies a legislative boost.
The new crypto framework
The Chamber of Deputies adopted a legal framework allowing the use of cryptocurrencies as a form of payment in Brazil. Agreement (2), signed under the designation PL 4401/2021—allows for the inclusion of digital money and frequent flyer miles (often referred to as "miles") in the definition of "payment arrangements" subject to the control of the nation's Central Bank. The law, which has already been adopted and needs the President of the Republic's signature to become effective, gives cryptocurrency payments for goods and services legal standing but does not elevate them to the level of legal tender.
What measures will be taken?
Brazil has advanced significantly in terms of investor adoption and regulation of cryptocurrencies. Most of the country's main banks and brokers presently offer some form of exposure to cryptocurrency investments or comparable services like custody or token offers, and it currently has the most cryptocurrency ETFs in Latin America. Even Ita, one of the biggest private banks in Brazil, is attempting to tokenize assets as a component of its upcoming suite of services for investors. (3)
When the law is implemented, it will be the body or office in charge of overseeing the matter is determined by the executive arm of the government (the President and its ministers); only tokens classified as securities fall under the purview of the CVM, Brazil's version of the SEC.
The CVM and the nation's own Central Bank (4) have been the government organizations most active in the field until now. The law also specifies guidelines for how bitcoin exchange platforms should run and for confiscating and managing cryptocurrencies by reputable third parties. Even though the legislation is silent, the nation has already taken substantial strides toward issuing a central bank digital currency.
One of the most crucial elements of the rule is the need for service providers to keep their funds distinct from their clients to avoid an instance like FTX, where the exchange used client cash for internal operations. The law eliminated a clause that would have given tax breaks to cryptocurrency miners and called for "tighter oversight" of the sector, acknowledging that the anonymity of digital currencies enabled illegal activity.