• Brazil’s President Jair Bolsonaro has signed a bill that makes bitcoin and other cryptoassets a legal and regulated payment option in the country.
• The bill defines virtual asset providers and the penalties for illegal acts involving crypto, and will go into effect in 180 days from the date of its official publication.
• Alex Adelman, CEO and co-founder of bitcoin rewards app Lolli, suggested that Brazil’s move to regulate bitcoin as a payment mechanism sets the stage for greater bitcoin adoption in the country and Latin America at large.
On Wednesday, Brazilian President Jair Bolsonaro signed a bill into law that established the country’s official and complete framework for the trading and use of “virtual currencies” in Brazil, per the federal government’s official journal. This bill, which was previously approved by Congress, is set to make bitcoin (BTC) and other cryptoassets a legal and regulated payment option in the country.
The document stated that “For the purposes of this Law, a digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes is considered a virtual asset.” It is important to note that this does not include national and foreign currencies, electronic currencies, instruments that provide certain benefits and services (such as points and rewards from loyalty programs), and securities and financial assets.
The bill also defines virtual asset providers (VASPs) as entities that execute, on behalf of third parties, at least one of these services: exchange between virtual assets and national or foreign currency, or between one or more virtual assets; transfer of virtual assets; custody or administration of virtual assets or of instruments that enable control over these assets; and the participation in financial services and offering of services related to the offer by an issuer or the sale of virtual assets.
Moreover, the bill stated that VASPs may only operate in the country with prior authorization from a federal public administration body or entity. Additionally, residents of Brazil will not be able to use cryptoassets as legal tender in the country, and perpetrators of illegal acts involving cryptoassets will be punished with fees and up to eight years in prison.
The new law will go into effect in 180 days from the date of its official publication. The Central Bank of Brazil (BCB) and the Securities and Exchange Commission (known as the CVM) are set to work together on overseeing the market, but with distinct roles: the BCB would focus on crypto used for payments, while CVM would keep an eye on crypto used as an investment asset.
Alex Adelman, CEO and co-founder of bitcoin rewards app Lolli, said that this move “sets the stage for greater bitcoin adoption in the country and Latin America at large.” Per Adelman, crypto adoption in Latin America continues to rise, driven in part by inflation which grew in this region at its fastest pace in over 15 years at an average of some 19%. As such, many citizens have turned to crypto, given that, despite volatility, bitcoin has increased in value, while the countries’ fiat currencies continue to depreciate.
Adelman argued that countries with significantly higher inflation than Brazil have an equal if not greater potential to benefit from bitcoin as an anti-inflationary, decentralized store of value. He also suggested that Brazil’s neighboring countries may decide to follow its move, given that, as one of the largest economies in the world and a trade leader in Latin America, Brazil’s use of bitcoin as both a store of value and a medium of exchange will likely inspire other countries to adopt similar laws to facilitate cross-border commerce. Finally, Adelman argued that countries with large unbanked populations would benefit from using bitcoin to eliminate dependence on banks, as anyone with an internet connection would have access to financial resources.
In conclusion, Brazil’s decision to make bitcoin and other cryptoassets a legal and regulated payment option in the country sets the stage for greater bitcoin adoption in Latin America. This move is driven in part by increasing inflation in the region, which has led many citizens to turn to crypto as a way to protect their wealth. Additionally, Brazil’s decision to use bitcoin as both a store of value and a medium of exchange is likely to inspire its neighboring countries to adopt similar laws to facilitate cross-border commerce. Finally, bitcoin can be used to provide financial access to those in countries with large unbanked populations.