Cryptocurrency regulation advances in Brazil’s Senate

RIO DE JANEIRO, BRAZIL – Brazil’s Senate took a first step toward regulating the national cryptocurrency market after a bill aimed at creating basic rules for digital currency funds and their daily use passed a key legislative stage.

The Senate Economic Affairs Committee unanimously approved the text on Tuesday. The bill will now proceed to a vote in the Senate, and if passed advances to the Chamber of Deputies, before President Jair Bolsonaro can consider enacting it into law.

The bill begins by defining virtual assets and classifying their service providers. Under the proposal, the federal government decides which agency will be in charge of regulating businesses with cryptocurrencies. The bill’s rapporteur, Senator Irajá Abreu, said on Monday that he expects this responsibility to fall on the Central Bank, which actively participated in the bill’s drafting.

Should the bill be passed, Brazil will become the largest Latin American country to regulate cryptocurrencies, thereby mitigating the potential for money laundering and reducing risks for investors. A number of smaller nations in the region are more advanced, with Cuba issuing rules recognizing and organizing their use and El Salvador making bitcoin legal tender alongside the U.S. dollar.

According to the bill, virtual asset service providers must prevent money laundering and concealment of assets, while fighting criminal organizations, the financing of terrorism and the spread of weapons of mass destruction. The draft provides for prison sentences and fines for infractions.

In late 2021, Brazil’s Chamber of Deputies passed a different bill with rules for the trading of virtual currencies in the country. That bill advanced to the Senate, which chose to vote on Abreu’s bill. However, once submitted to the Senate, a bill can be attached to another.

The bill’s rapporteur said that the rule adopted today, focused more on investments than on popular use, creates a favorable environment for the more regular use of cryptocurrencies.

“With the regulation, cryptocurrencies will become even more popular,” Abreu said. “Once this regulation is passed, it will tend to be increasingly adopted in supermarkets, in commerce, in car dealerships.”

The proposed bill comes at a time when Brazil’s Central Bank is working on a digital version of the Brazilian real. The project is aimed at promoting investment rather than commercial use and is expected to be tested in the second half of the year.

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