In the past few weeks, a special committee of the House of Representatives of Brazil has approved the Bitcoin bill, leading many in the crypto community to believe that the country will follow the example of El Salvador and make Bitcoin the country’s legal tender.
but it is not the truth. Not only does the bill fail to mention Bitcoin as legal tender, but Roberto Campos Neto, the governor of the Central Bank of Brazil, has repeatedly stated that making Bitcoin a legal tender in the country is not on his agenda. .
The bill (PL 2303/15) was approved by a special committee of the House of Representatives on September 29, and has now been submitted to the plenary for consideration. The Senate will soon follow, and the final step of the bill will be the deliberation of the President’s Office.
Contrary to rumors, the bill does not seek to make Bitcoin a legal tender in Brazil. On the contrary, it tries to strengthen the protection of investors through stricter supervision of companies participating in “encrypted assets” and supervision of service providers that provide transactions and custody of encrypted assets.
Strictly control encrypted asset service providers
The bill characterizes “crypto assets” as property-any digital representation of value that can be transferred electronically and used as an investment or payment method. This definition may cause confusion and misinformation, but using something as a payment method does not make it legal tender.
For example, Brazilians can use airline miles to buy air tickets, daily consumer goods, and hotel accommodations, but they are not legal tender. The “digital representation” of legal assets such as domestic and foreign currencies, electronic currency, airline miles, real estate and financial assets are not considered virtual assets.
The bill defines an “crypto asset service provider” as any company that performs at least one “crypto asset service.” Encrypted asset services are the exchange with legal tender, exchange between encrypted assets, transfer of encrypted assets, custody, and participation in financial services and service provision related to the issuer’s offer or the sale of encrypted assets.
Companies must comply with the rules of financial transactions, customer identity and record keeping. Institutions authorized by the Central Bank of Brazil can provide encrypted asset services or accumulate encrypted assets through other activities. The form is promulgated by the agency or entity of the Federal Public Administration.
Companies interested in the field of “crypto assets” can only operate in the country after they are registered and licensed. This may require entity authorization from the Brazilian Federal Public Administration. The government will decide which public administrative entity or entities will supervise the industry and its Companies and which crypto assets will be regulated.
According to the Act, providers of crypto asset services must comply with the following guidelines:
-Free enterprise and free competition;-Good governance practices and risk-based methods;-Information security and personal data protection;-Protection and defense of consumers and users;-Protection of public savings;-Operational stability and efficiency;-Prevention Money laundering, terrorist financing and the proliferation of financing weapons of mass destruction are in line with international standards.
Fight cryptocurrency money laundering
The Bitcoin Act will pay special attention to money laundering of encrypted assets. The bill increases the penalties for criminals who use cryptocurrency to launder money from 33% to 66%, which means that those who are found to launder money through cryptocurrency will have to hand over ⅔ of funds instead of just handing in as in the previous law. ⅓. The bill also extends the prison sentence that criminals may face. The current law in Brazil is that the sentence for money laundering is three to ten years, and a fine is imposed. The updated rules of the bill increase the minimum period to four years and the maximum period to 116 years and 8 months.
Fight cryptocurrency fraud
The typical feature of the crime of fraud in providing encrypted asset services is to organize, manage, and provide investment portfolios or intermediary transactions involving encrypted assets to obtain illegal benefits, harm the interests of others, induce or make someone make mistakes, through illegal means, trickery or any other Other fraudulent methods. The penalty is four to eight years’ imprisonment and a fine. If a virtual asset service provider operates without authorization, it will constitute a financial crime and be sentenced to one to four years in prison and a fine.
What do the bill writers think?
Aureo Riberio, the agent who wrote PL 2303/15, stated in a statement that “in my state, more than 300,000 people have been harmed by the financial pyramid made with cryptocurrency” (referring to Cabo Frio, the largest in Brazil to date. Cryptocurrency Ponzi scheme, the company promises up to 15% return on investment). He added that the bill aims to ensure that Brazil becomes a market that cryptocurrency investors want to watch, and that criminals are not allowed to go unpunished. “The Brazilian market will move forward and adjust. No profiteers will use technology to deceive millions of Brazilians.”
His deputy added that he hopes that the bill will help generate revenue for the government through asset seizures, and that “this is a bill that can be used as a reference for other countries.”
The country prefers CBDC
The Central Bank of Brazil is taking swift action to create the Brazilian Central Bank Digital Currency (CBDC), a digital version of the country’s national currency, the real (hereinafter collectively referred to as “Digital Real”). In May, the central bank released ten guidelines for digital real development.
The President of the Brazilian Central Bank, Campos Neto, intends to launch Brazil’s CBDC in the next few years. He plans to hold seven webinars on “Digital Real” between July and November, with the goal of communicating with Brazilian society. Discuss the ten instructions issued in May, study the use cases that may benefit from Digital Real, and the technologies that are most suitable for implementing Digital Real.
Four webinars in the past few months discussed use cases for digital real, data security details and confidentiality, offline operations, smart contracts, and the Internet of Things (IoT). The fifth webinar will be held on October 20th, Beijing time to discuss the issuance, distribution, custody and destruction strategies of Digital Real. It is reported that the last two webinars will discuss international integration requirements and technologies for distribution and interoperability with existing systems.
Campos Neto has always been outspoken about digital Real and Bitcoin, but he has shown greater interest in the development of Brazil’s CBDC compared to the adoption of Bitcoin as legal tender. He explained that digital Real will depend on instant payments, open systems and convertible currencies.
The path to making digital Real a reality is currently awaiting a vote in the Senate. But currently, Act No. 5.387/19 is one of the government’s priorities. It aims to modernize the Brazilian foreign exchange market, Brazilian foreign capital, and Brazilian foreign capital, and report it to the Central Bank of Brazil.
Summary: Bitcoin is far from becoming legal tender in Brazil
In short, it is clear that Brazil will not make Bitcoin a legal tender anytime soon, based on the Bitcoin and Crypto Assets Act currently in various stages approved by the Brazilian government, the actions of the Brazilian Central Bank, and Campos Neto’s comments. This is not even in the plans of the Brazilian central bank or the government.
Brazil is strengthening the regulatory review of companies in the “virtual asset” field to “strengthen investor protection.” Improve the ability to use Bitcoin and cryptocurrencies to pay for goods or services, similar to airline miles and other loyalty programs, but will not make Bitcoin or any other crypto assets the country’s legal tender.