The Use of Cryptocurrency as a Valid Form of Payment Is Now Legal in Brazil

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Last Updated on November 30, 2022 by Bitfinsider

Brazil has not designated Bitcoin as legal tender; however, it has done the next best thing: it has passed a law legalizing cryptocurrencies as means of payment throughout the country. This gives a regulatory boost to the adoption of digital currencies and the expansion of the ecosystem. Brazil has not designated Bitcoin as legal tender.

The House of Representatives in Brazil has given its approval to a regulatory framework that will make it possible for anyone to utilize cryptocurrencies like bitcoin and ether as a form of payment across the country.

The document, which was signed under the code PL 4401/2021, provides for the inclusion of virtual currencies and frequent traveler rewards from airlines (the popular “miles”) in the definition of “payment agreements” under the supervision of the country’s Central Bank. This provision was made possible by the inclusion of the aforementioned code.

The law, which has already been adopted and needs only the signature of the President of the Republic to be enacted, provides payments in cryptocurrencies for goods and services the status of legal payments; nevertheless, it does not give cryptocurrencies the status of legal cash.

In Brazil, there has been significant progress achieved in terms of the regulation of cryptocurrencies and the use of cryptocurrencies among investors. It is currently the country in Latin America with the most cryptocurrency exchange-traded funds (ETFs), and the majority of the country’s major banks and brokers currently offer some type of exposure to cryptocurrency investments as well as similar services such as custody or token offerings. In addition, it is the country that currently holds the title of having the most cryptocurrency ETFs in Latin America. Even Ita, one of the largest private banks in Brazil, is working on developing a tokenization system for assets as part of the future suite of services that it will offer to investors.

Only tokens that are classified as securities are subject to the jurisdictions of the CVM, which is Brazil’s equivalent to the Securities and Exchange Commission (SEC). Once the law is enacted, it will be up to the executive branch of the government (the president and its ministers) to determine the body or office that will be in charge of supervising the matter.

The country’s Central Bank and the CVM have been the public agencies that have been active in the region to the greatest extent up to now. In addition, the legislation specifies standards for the operation of cryptocurrency trading platforms, in addition to the services of custody and administration of cryptocurrencies by reputable third parties.

Despite the fact that the legislation makes no mention of any provisions for the issue of a digital currency by the central bank, the government has already made great headway in the area.

In order to avoid a scenario like the one that occurred with FTX, in which the exchange used the money belonging to its customers for its own financial activities, one of the most essential aspects of the regulation is the requirement that service providers keep their own funds distinct from those belonging to their customers. This is one of the most significant aspects of the regulation.

The legislation did away with a clause that would have provided cryptocurrency miners with tax breaks. It also acknowledged the fact that the pseudonymous nature of digital currencies made it easier for criminals to carry out their activities and called for “tighter oversight” of the industry.

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Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.