Brazil has recently given a regulatory boost to the adoption of digital currencies and the expansion of the crypto industry after legalizing, not just Bitcoin (BTC), but cryptocurrencies as means of payment across the country.
The regulatory framework legalizing the use of cryptocurrencies as a means of payment has just been approved by Brazil’s Chamber of Deputies.
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The document, signed under the code PL 4401/2021, makes provision for the inclusion of virtual currencies and frequent traveler rewards from airlines in the definition of payment agreements, which will be supervised by the Central Bank of Brazil.
Although the law has been approved, there is a need for enactment by the President of Brazil. The law gives legal status to payments for goods and services in form of cryptocurrencies. However, this does not grant them a legal tender status.
After the law comes into place, it will be up to the executive branch of the government to determine the body or office in charge of supervising the matter—only tokens categorized as securities fall under the jurisdictions of the CVM, Brazil’s equivalent to the SEC.
It should be noted that the law does not mention any dispositions regarding the issuance of a central bank digital currency; however, Brazil has already made significant progress in the matter.
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One of the most important aspects of the regulation is the obligation for service providers to separate their funds from those of their clients as a way to prevent a situation similar to that of FTX, where the exchange used its clients’ funds for its own financial operations.
The law avoided a provision granting tax benefits to cryptocurrency miners and also recognized that digital currencies facilitated criminal operations because of their pseudonymous nature, calling for “closer monitoring” of the industry.
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