Instead of designating Bitcoin as a legal tender, Brazil’s official authorities have legalized cryptocurrency as a payment method countrywide for progressive growth. The bill has been stuck in the Chamber of Duties since April after the Senate’s approval has now passed on Tuesday to make cryptocurrency legal in the country’s use.
This step is indeed a great thing that happened in the digital currency world, giving it a regulatory boost to expand the ecosystem. While this law, after the President of the Republic’s sign, gives cryptocurrency a legal status to use for goods and services, it still does not grant it legal tender status.
When it comes to Cryptocurrency regulation and adoption, Brazil is more progressive compared to other countries. Currently, it has the maximum cryptocurrency ETFs in Latin America, and most of its banks or small brokers provide virtual token offerings or cryptocurrency exposure. Not only this, the Country’s one of largest private banks, Even Itaú, is planning to tokenize the crypto assets for its investors as a future service pack.
Once the law is fully applicable, the executive branch of government will decide on a supervising body in charge to regulate the smooth utilization of cryptocurrency as a payment method. The tokens that will be regarded as securities will remain under the hold of the Exchange Commission (CVM) and Brazilian securities so that no one can misuse them.
The country has not only permitted the use of cryptocurrency as a payment method but also enabled the license creation for cryptocurrency exchange platforms and the management and custody of virtual currencies by third parties.
However, at the same time, it will be necessary for cryptocurrency exchanges to draw a clear distinction between user funds and company funds to avoid scenarios like the FTX collapse, where the company used the users’ funds for its financial operations.
While this recent law has made much progress in cryptocurrency regulation and the smooth working of exchanges, the issuance of the central bank’s virtual currency is still a matter of disposition. Currently, the law is not offering any tax benefits to crypto miners.
Also, due to the volatile and pseudonymous nature of digital currency, close monitoring of the industry is required. Meanwhile, Thiago César, Transfero Group’s CEO (closely associated with Brazil’s crypto ecosystem), ensured that the FTX collapse would not hamper the everyday use of digital currency in Brazil. It will be interesting to see how this law will affect the future growth of the crypto ecosystem.