B is for Bitcoin (or Brazil)

After a long wait, Brazil’s lower house of Congress approved in November a bill that will take the cryptocurrencies regulatory framework in Brazil a major step forward. It is important to note the timing of this much anticipated event, during “crypto winter”, which is probably another sign that the crypto revolution has not yet come to a holt. Far from it.

Brazil is one of the top 10 Crypto globally active markets according to Chainalysis data (2022) so it is safe to say that the bill, once finally approved by outgoing president Jair Bolsonaro, has a potential to hugely and favorably affect the Crypto industry, not only in Brazil, but also worldwide.

Interesting enough, due to the fact that as reported by the media, Bolsonaro is currently questioning the election results, it is still to be seen whether he will approve the bill or not. If the bill is not approved within the required time period, it can face substantial hurdles and might even be sent back to the Brazilian law makers for another round of revisions (or worst).

The newly approved bill calls for regulating the sector by a government-appointed federal agency which will manage the operations of crypto exchanges and other service providers and enforce the newly enacted regulation. Other Brazilian government agencies, such as the central bank, will also have a part in regulating and supervising the industry.

Following the approval of the new bill, Brazilian citizens will be able to use Bitcoin and other cryptocurrencies as a payment method, and digital assets will from now on be recognized as an investment asset, which will also have tax consequences for executed transactions. But the effects of the new bill are much wider than that.

The new bill will apply to any business that exchanges Crypto to FIAT (local or foreign currencies) or Crypto to Crypto or that is involved in financial services related to Crypto currencies issuers, and among others will require all Crypto businesses to have a physical entity in Brazil.

The above requirement, to establish a Brazilian company and to comply with all other ancillary requirements, might prove to be a challenging task for many international businesses, however once accomplished, will help to make the experience of doing business in Brazil much less painful, including when it comes to tax considerations and getting money in and out of Brazil.

Crypto exchanges will be required to be certified by the federal government in Brazil and to adhere to various rules to operate in the Brazilian market, such as the requirement to keep clients’ funds in segregated accounts (which is a standard requirement in other financial markets and territories for securing clients’ funds and preventing abuse).