Brazil Tip-Toes Towards Crypto Regulation, Approves Digital Currency Bill

In Brief:

• Brazilian Senate approved a bill Tuesday legitimizing crypto transactions.
• The bill was introduced by Sen. Flávio Arns and still needs approval from the full Senate and the lower house.
• The legislation attempts to create ground rules for the day-to-day usage of Bitcoin in financial transactions.

The economic affairs committee of Brazil has approved a crypto bill on Tuesday, which marks the country’s first step towards regulation.

The bill aims to drive cryptocurrency usage in Brazil. It outlines basic rules for crypto funds and their day-to-day usage as a payment option, passing a critical legislative stage.

If approved, the move would make Brazil the largest Latin American country to formally regulate cryptocurrencies, Bloomberg reports. Smaller countries in the region, such as El Salvador and Cuba, have already gone a bit further in recognizing Bitcoin as legal tender.

However, before signing it into law by the Brazilian President Jair Bolsonaro, the legislation still needs adoption by the full Senate and lower house. The bill is now out to vote for approval by lawmakers.

Senator Iraja Abreu, who wrote the draft, said that the central bank is the body that is responsible for regulating business with cryptocurrencies. He told Bloomberg that Brazil’s de facto bank Banco Central has actively constructed the bill.

Key to Crypto Adoption

Crypto adoption is picking up a fast-paced momentum in Brazil. The nation is keen on regulating cryptos to catch up with the burgeoning market.

The legislation has laid out specific rules to virtual asset service providers in the country, such as preventing money laundering and concealment of assets, terrorism financing, among others. The Senate has imposed imprisonment and fines for violating the rules. The bill also provisions tax incentives for the bitcoin mining industry.

According to Abreu, the bill will likely generate a favorable environment for wider crypto adoption in the nation.

“Once this regulation is approved, the trend is that it will be increasingly adopted in the supermarket, in commerce, in a car dealership.”

Also, in a recent move, Brazil-based crypto asset managers launched a decentralized exchange-traded fund (ETF) on the B3 stock exchange. The crypto ETF move that raised $10.5 million and the latest bill for the regulation contribute as a positive catalyst for Bitcoin adoption in Brazil.

Brazil’s Crypto-Friendly Moves

This year, Brazil is close to starting its pilot program for a digital Real – central bank digital currency (CBDC). In September’21, the central bank told the Brazilian Senate that it plans to launch the digital version of money in 2024.

Last year, the central bank’s President Roberto Campos Neto said that crypto purchases are affecting Brazil’s import figures.

“[Crypto] is already starting to affect even the national accounts, which means it has become a relevant investment instrument.”

Besides, the country’s seaside city of Rio de Janeiro said last month that it would buy Bitcoin for city reserves and provide a 10% discount on taxes when paid in Bitcoin, after carefully studying the possible legal framework.

Additionally, the mayor of Rio, Eduardo Paes, promised to launch its coin dubbed “Crypto Rio.”