Brazil Legalizes Cryptocurrency as a Payment Method
Brazil has not classified Bitcoin as legal cash. Still, it has done the next best thing: passed legislation authorizing cryptocurrencies as a form of payment throughout the country, providing a regulatory boost to digital currency acceptance and ecosystem expansion. Brazil’s Chamber of Deputies has established a regulatory framework that will allow cryptocurrencies to be used as a form of payment in the country.
Brazil Legalizes Crypto as a Method of Payment
The legislation, signed under the code PL 4401/2021, includes virtual currencies and frequent traveler incentives from airlines (popularly known as “miles”) in the category of “payment agreements” subject to supervision by the country’s Central Bank.
The measure, which has already been adopted and only needs the signature of the President of the Republic to become law, grants legal standing to payments in cryptocurrency for goods and services—but not legal cash.
Brazil has made significant strides in cryptocurrency legislation and investor adoption. It presently has the most cryptocurrency ETFs in Latin America, and the majority of the country’s main banks and brokers have some form of exposure to cryptocurrency investments or related services such as custody or token offers. Even Ita, one of Brazil’s major private banks, is working on tokenizing assets as part of its future suite of investor services.
Only tokens classified as securities fall under the purview of the CVM, Brazil’s version of the SEC, after the law takes effect; the executive arm of the government (the president and its ministers) will decide which office will be in charge of overseeing the situation.
The CVM and the nation’s own Central Bank have been the two government entities most actively involved in the field up until now. The law also creates regulations for the operation of cryptocurrency exchange platforms and the custody and management of cryptocurrencies by reputable third parties.
Even though the legislation is silent, the nation has already taken substantial strides toward issuing a central bank digital currency.
To avoid a situation similar to FTX, where the exchange utilized its clients’ cash for its financial operations, one of the most crucial components of the rule requires service providers to keep their funds separate from those of their consumers.
The law eliminated a clause that would have given tax breaks to cryptocurrency miners and called for “tighter oversight” of the sector, acknowledging that the anonymity of digital currencies enabled illegal activity.
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