Brazil approves bill regulating the use of Bitcoin and other cryptocurrencies as an official payment method. This is yet another step forward for the crypto world, which is increasingly making inroads into classic finance.
The news, favorable to the blockchain world, is reported on Bitcoin Magazine‘s official Twitter profile, which reads:
BREAKING: 🇧🇷 Brazilian lawmakers approve bill regulating use of #Bitcoin and crypto as payment 🙌
— Bitcoin Magazine (@BitcoinMagazine) November 29, 2022
“Brazilian lawmakers approve bill regulating use of #Bitcoin and crypto as payment.”
Brazil’s bill: all the news for Bitcoin
The comprehensive regulatory framework recently approved by Brazilian lawmakers includes new benefits for Bitcoin and crypto embedded in the world of traditional finance. Specifically, Bitcoin will be allowed to be used for trading and the use of cryptocurrencies will be normalized in the country.
Voted on Tuesday night in Brasilia, the country’s capital, the new rules recognize Bitcoin as a digital representation of value that can be used as a means of payment and as an investment asset in the South American nation.
The bill applies broadly to an area defined as “virtual assets” and now requires only the president’s signature before it becomes law. However, while this bill is a significant step forward, it still does not make Bitcoin or any cryptocurrency a legal tender in the country.
In fact, the bill mandates the executive branch to select government bodies to oversee the market. The expectation is that the Central Bank of Brazil (BCB) will be responsible when Bitcoin is used as payment. Whereas, the country’s Securities and Exchange Commission (CVM), will act as a sentinel when it is used as an investment asset.
Both the BCB and the CVM, along with the Federal Fiscal Authority (RFB), have helped lawmakers draft the overhaul legislation.
Rules, prohibitions and preventions: everything there is to know about the relationship between Brazil and crypto
Home to a vibrant cryptocurrency economy, Brazil has repeatedly seen its citizens trade coins like Bitcoin rather than invest in the stock market. Now, the country is trying to pave the way for this to translate into more daily use in financial transactions.
In any case, there is more than just positive news for Brazil’s market development. Indeed, a big miss from Tuesday’s vote was the rejection of a clause that sought to cut some state and federal taxes on purchases of Bitcoin mining machines.
While the text was quite restrictive, in that the benefit would apply only to operations that use renewable energy sources, it was apparently not enough to be approved.
Other provisions include regulation of service providers such as exchanges, which will have to comply with specific rules to operate in Brazil.
The bill aims to regulate the establishment and operation of Bitcoin service providers in Brazil, defining those who provide trading, transfer, custody, administration or sale of cryptocurrency on behalf of third parties as entities.
Thus, cryptocurrency service providers will only be allowed to operate in the country with explicit authorization from the federal government.
In addition, one more rule was rejected during Tuesday’s vote. Namely: the requirement for such companies to explicitly separate their assets from the capital held by customers, as for example Bitcoin The firm holds on behalf of its users.
Specifically, the clause was intended to prevent events like the one that happened recently at FTX, in which users’ funds were mixed with the firm’s funds. If the clause had been upheld, it could have helped customers recover assets in the event of bankruptcy.
Bitcoin: currently legal tender only in El Salvador and the Central African Republic
At present, only two countries in the world have officially declared Bitcoin as legal tender. Logically, these are poor countries with a limited population and, most importantly, do not have their own national fiat currency.
The first country ever where Bitcoin has been declared legal tender is El Salvador, a small Central American state with about 6.5 million inhabitants and 112th in the world in per capita GDP adjusted for purchasing power.
The country brought Bitcoin in as its official currency on 7 September 2021 alongside the US dollar, which it already used as a legal tender fiat currency, not having one of its own.
The second country was the Central African Republic (CAR), a medium-sized state in Central Africa but with a population of less than 6 million. Specifically, this is one of the poorest countries in the world, with an annual GDP per capita PPP of just over $500, which puts it 179th overall on a global scale.
The country uses the so-called CFA Franc, issued by the Central Bank of France, as its fiat currency. In April this year, CAR decreed that Bitcoin will also be legal tender within it.