Brazil Moves to Regulate Local Crypto Market

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Proposed legislation aims to curb crimes associated with crypto assets

Brazil on Tuesday gave the green light to a law that would provide guidelines for cryptocurrencies. The Brazilian Senate’s economic affairs committee unanimously approved the crypto bill paving the way for a final vote in both houses of Congress. If the bill successfully makes its way through the Brazilian National Congress, President Jairo Bolsonaro will consider it for his signature.

The implementation of crypto regulations in Brazil would see Latin American’s largest country join others setting clear guidelines and rules for the emerging asset class. El Salvador famously became the first country in the world to recognize Bitcoin as legal tender in September 2021, even giving citizens $30 in Bitcoin for downloading its national digital wallet.2 Meanwhile, Cuba last year announced that it plans to recognize and regulate cryptocurrencies such as Bitcoin, citing “reasons of socio-economic interest.”

What the Bill Covers

The proposed bill begins by defining what virtual assets are, outlining the responsibilities of crypto services providers, and setting out the regulatory framework for digital currencies. It also suggests that the Brazilian federal government determine which body would enforce crypto regulations.

A bill that would regulate cryptocurrency exchanges was passed by the Brazilian Congress last week. Once the bill becomes law, it will increase adoption and popularity of cryptocurrencies throughout Brazil.

Focus on Curbing Crypto-Related Crime

Abreu also pointed out that regulatory clarity would help curtail crimes associated with cryptocurrencies. “The intention of this project is to curb or limit illegal activities, including money laundering, tax evasion and many other crimes,” he said. “There is a market for illegal drugs, but most of the time people don’t use them because they’re not safe.”

The bill proposes that cryptocurrency service providers have AML systems and monitoring to prevent illegal use and concealment of cryptocurrencies while also introducing imprisonment and penalties for breaching crypto laws. Authorities in Brazil seized $33 million worth of cryptocurrencies during an investigation into money laundering.

Brazil, like several other nations, continues to work towards developing a CBDC for its local unit—the Brazilian Real. The BCB hopes that by running a pilot program later this summer, they will be able to launch their digital real in 2024.

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