Brazil legalizes cryptocurrency transactions, laying the groundwork for further adoption of Bitcoin.

Brazil legalizes cryptocurrency transactions, laying the groundwork for further adoption of Bitcoin.

Brazil's President, Jair Bolsonaro, has approved legislation that makes it legal and regulated for citizens to use Bitcoin (BTC) and other cryptocurrencies as a form of payment there. 

According to the federal government's official journal, Bolsonaro signed a bill into law that established the nation's official and comprehensive framework for the trading and usage of "virtual currencies" in Brazil. The legislation was signed on Wednesday and made public on Thursday after being previously approved by Congress.

It was stated that 

A virtual asset is defined as "a digital representation of value used to make payments or for investment purposes that can be traded or transferred by electronic means for the purposes of this Law."

National and foreign currencies, electronic currencies, tools that offer particular advantages and services (such as points and prizes from loyalty programs), securities, and financial assets are all excluded from this. 

The term "virtual asset providers" (VASPs) refers to companies that carry out at least one of the following services on behalf of third parties: exchanges between virtual assets and real money, or between one or more virtual assets; transfers of virtual assets; custody or administration of virtual assets or of tools that give users control over these assets; participation in financial services; and provision of services associated with an issuer's or a seller's offer of virtual assets.

The document further mentioned, 

Only with previous approval from a federal public administration body or entity are virtual asset service providers permitted to operate in the nation.

Cryptoassets will not be accepted as legal money in Brazil by its citizens. 

The bill stipulated that those who engage in illicit activities with cryptocurrency would be subject to fines and sentences of up to eight years in prison. 

It continued, "If the crimes listed in this Law are committed frequently, through a criminal organization, or through the use of virtual assets, the penalty will be doubled from 1/3 (one third) to 2/3 (two thirds).

The new law will become effective 180 days after it is formally published. 

The Securities and Exchange Commission (also known as the CVM) and the Central Bank of Brazil (BCB) are expected to collaborate on market supervision, but they will play different roles: the BCB will focus on cryptocurrencies used for payments, while the CVM will monitor cryptocurrencies used as investment assets. However, the agencies of government that would serve as watchdogs have not yet been chosen.

The Brazilian Central Bank "issued a resolution" that established a "interdepartmental working group" with an emphasis on tokenization, as was previously reported in December. In relation to the "registration, custody, trading, and settlement activities of financial assets that use blockchain-powered technology," this committee would "eventually recommend regulatory reforms." 

The group will put together a "final report" that it will deliver to the bank's Governance, Risks and Controls Committee in 2023, when its schedule of meetings comes to an end.

The CVM had previously been eager to pursue a laissez-faire attitude toward crypto regulation but has now reversed this position and intends to start police the sector. The BCB is not exactly crypto-friendly.

Greater Bitcoin adoption in LATAM

In a statement provided to Cryptonews.com, Alex Adelman, the CEO and co-founder of the Bitcoin rewards app Lolli, stated that, 

The decision by Brazil to regulate Bitcoin as a payment method "paves the way for further Bitcoin usage in Brazil and across Latin America."

According to Adelman, Latin American usage of cryptocurrencies will increase by 40% in 2022. The CEO claims that inflation, which increased in this region at its quickest rate in more than 15 years at an average of about 19%, is a big factor in the situation. Given that, despite instability, Bitcoin's value has climbed as these countries' fiat currencies continue to decline, many of their inhabitants are turning to cryptocurrencies in Argentina and Venezuela. 

Adelman asserted "Brazil's appetite for cryptocurrency as a form of payment is mostly driven by inflation. [...] The potential benefits of using Bitcoin as an anti-inflationary, decentralized store of money are on par with, if not greater than, those of Brazil."

The CEO explained that while global inflation is substantially higher in over 100 countries than Brazil, which has an inflation rate of little over 6%. 

As a result, Adelman predicts that Brazil's neighbors may opt to imitate its actions. 

Brazil's adoption of Bitcoin as a store of value and a medium of exchange, one of the largest economies in the world and a leader in Latin American trade, also suggests that nearby economies will soon implement comparable regulations to encourage cross-border trade.

He stated that using Bitcoin to reduce reliance on banks would be advantageous for nations with sizable unbanked populations since it would give anyone with an internet connection access to financial resources. Adelman predicted that more Latin American and other high-inflation nations would start using Bitcoin as a payment method and a kind of currency in 2023.

Article Credit: Cryptonews.com

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