The cryptocurrency law, which has been debated for several months, has been approved by the Chamber of Deputies in Brazil after some changes introduced by the Senate. The proposal left out two planned tax exemptions for greenfield mining operations and the separation of client assets from company funds for virtual asset service providers (VASPs).
Cryptocurrency law in Brazil finally approved
The cryptocurrency bill, identified as number 4.041/2021, was approved at the November 29 meeting of the Chamber of Deputies. The bill, whose debate and approval has been delayed several times due to last month’s general election, must now be ratified by President Jair Bolsonaro, who must sanction it before announcing it into law.
Lawmakers voted to overturn most of the Senate’s proposed changes, which would have allowed the law to be approved in a more general form and allow more specific rules to be formulated later. The speaker of the project, deputy Expedito Neto, noted the importance of this law for the country. He said:
We are voting on a historical issue. Today, the country is ahead of others when it comes to regulating activities with digital assets. In this matter, the current government and the future government have support.
According to local media, the discussion of the law was rushed due to the unknown position of the government of President-elect Luis Inacio Lula Da Silva on the issue, with some lawmakers arguing that the bill could face resistance with the new government. It is planned to open on January 1.
Asset Allocation and Other Items are Omitted
Left out of the final document was a proposed tax break for cryptocurrency mining industries that use green energy in their operations. The rapporteur of the project believed that the tax regulation should be defined in another draft law on this issue.
Another challenge was the issue of client asset segregation, which forced virtual asset service providers to separate client funds from their own funds. This was one of the main points of the debate, and many MPs supported it to prevent the loss of funds to users, as happened during the recent bankruptcy of the leading cryptocurrency exchange FTX.
The opposite side dominated the analysis, with analysts saying that not using client funds to operate could limit the portfolio that brokerage firms and other companies in the region can offer, limiting them to offering spot-based trading products. For now, the regulation of these products and what guarantees these companies provide to their users must be determined individually by the regulator.
Implications for the future
The approval of the cryptocurrency law is the starting point for the regulation of VASPs and other companies using cryptocurrency in the country, which will now be overseen by a regulator to be appointed by the executive body, which may be the Central Bank of Brazil or another special body.
Many analysts believe that this is the early stage of this regulation, and expect that the law’s enforcement and the rise of special regulations will begin to be implemented in the coming years. This is the view of Isak Costa, partner at Warde Advogados:
It will probably take up to two years for the law to have any practical effect, which leads me to believe that its approval is merely a symbolic act.
This is because the bill is approved with very general directives, which will have to be further developed in subsequent bills. However, according to digital rights lawyer Marcelo Castro, the bill creates a framework that will serve to “subsidize future infra-legal regulation.”
What do you think about the recent approval of cryptocurrency legislation in Brazil? Let us know in the comment section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
Refusal: This article is for informational purposes only. This is not a direct offer or an offer to buy or sell or a recommendation or endorsement of any products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author shall be liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use or use of any content, goods or services mentioned in this article. .