Draft law: Bitcoin & Co.: Brazil wants to enable the use of cryptocurrencies as a means of payment – New guidelines for crypto providers | news

• Cryptocurrencies enjoy wide acceptance among retail investors in Brazil
• Bill: Cryptos must be legalized as a payment method
• Legal framework also brings new guidelines for crypto providers

Cryptocurrency Market Latin America

According to a Chainalysis report earlier this year on Latin America’s top drivers of crypto adoption, the Spanish- and Portuguese-speaking countries of the Americas accounted for the seventh largest cryptocurrency market in the Crypto Index in 2022. Chainalysis data revealed that from July 2021 to June 2022, citizens of Latin America received $562 billion in cryptocurrencies, representing a 40 percent growth from the previous year’s total. Latin America is also home to five of the top 30 countries in Chainalysis’ crypto index this year: Brazil, Argentina, Colombia, Ecuador and Mexico.

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Brazil: Cryptocurrencies enjoy wide acceptance among retail investors

In Brazil, which ranked seventh in Chainalysis’ crypto index this year, the main use case for crypto right now is speculative investment, according to Thomaz Fortes, head of crypto at Nubank. “Customers want a way to increase their revenue,” says Chainalysis Fortes. “All-time low interest rates in the country and a sharp rise in cryptocurrency prices may have contributed to this, but adoption continued through the so-called crypto winter.” Fortes also points out that the number of crypto users has grown much faster than the number of investors in the stock market, and that it is not just “institutional or wealthy individuals” – the democratization of access also means a lot of acceptance, according to Fortes. among small investors. Chainalysis was also able to find evidence of this acceptance among retail investors. Compared to other Latin American countries, a larger proportion of transaction volume in Brazil can be found in smaller transactions.

The bill allows for the legalization of cryptos as a means of payment

The acceptance of cryptocurrencies among small investors in Brazil may now gain further momentum because cryptocurrencies are to be made legal tender in the largest country in South America – not like Bitcoin in El Salvador, but – as a payment method in the country. The legal framework recently approved by the Brazilian Chamber of Deputies (PL 4401/2021) “provides for the inclusion of virtual currencies and air miles programs in the definition of “payment agreements” under central bank supervision”.

Banks in Brazil, some of which, as Decrypt reports, are already experimenting with crypto custody, could then offer, for example, crypto payment services, thus facilitating the use of cryptocurrencies for daily purchases and sales. Cryptocurrencies can become a real alternative to other payment methods, and the main use of crypto in Brazil, which according to Fortes is currently speculative investment, may soon change.

New guidelines for crypto providers

For crypto providers, the new legal framework may pose new challenges as it provides guidelines “to be taken into account when providing virtual asset services and when regulating virtual asset services.” According to Reuters, the new rules would “apply to legal entities[…]that convert virtual currencies into local or foreign currencies, exchange virtual assets, make money transfers, or engage in financial services related to issuers or sellers of virtual assets” and strengthen oversight of the country’s cryptocurrency sector.

According to local media, the draft law would even “force all locally active crypto providers to have a physical entity in the country” and lead to fines or even jail time if they do not comply with the new rules. According to the media, the draft law should give companies a grace period for compliance.

The law will also require exchanges to clearly distinguish between corporate and user funds, Cointelegraph reports. This is likely to play a particularly important role after the collapse of FTX – formerly one of the world’s largest crypto exchanges – when former FTX CEO Sam Bankman-Fried is said to have siphoned millions of dollars from investors.

Brazilian crypto advocates reportedly supported the bill, saying it was important to set rules for the industry, according to Reuters.

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