Luiz Inacio Lula da Silva, the Brazilian President has signed a bill which will give the central bank and the security regulators jurisdiction over the virtual currency. Although, the rules were proposed in December which includes the clarity on digital assets, it supports and permits the payments in digital currency and sets out penalties to stop the fraud in this sector.
This bill legalizes payments made in digital currency and also penalizes firms that do not follow the licensing regulations. The law will come into effect by June 20th, 2023, confirming the regulation and license of security firms.
CVM Will Make a Legal Decision over Securities
The country’s security and exchange commission, Comissao de Valores Mobiliarios (CVM) , will have legal decisions over securities. However, the law does not give clarification on whether all the tokens are securities.
This assigned the responsibility of which token should be considered as security to CVM, and the matter has already started legal issues in many countries. One of such ongoing legal battles is between the U.S security and exchange commission (SEC) and Ripples on declaration of XRP token as security.
The new law signed will abide by the central bank charged with licensing the virtual currency firms. The expected licensing regulations will imply the need for licensing all the crypto exchanges. The legal transparency will welcome with the closure of Virtual Asset Service Providers (VASPs). Previously, many local banks had closed the digital asset accounts of firms.
Without accelerating any reason for closure, the Brazilian court favors Mercado Bitcoin over the illegal closure of the account, whereas the bank wanted the court to reverse its decision supporting the earlier decision by the local court that allowed the exchange to keep its crypto related accounts with the bank.
Judge Lucia made a judgment declaring banks should come with an actual reason before closing the crypto accounts. Besides knowing the risks attached with crypto and declaration of threats related to this industry by many authorities, the Central Bank of Brazil has not prohibited digital assets trading.
New Law Implies Regulatory Framework
On one hand, the new law will focus on the regulatory framework, while on the other hand, it fails to provide the exact implementary laws on digital assets as securities. Hence, the confusion still lies.
It does not imply the minute details of the regulation like placing exchange and wallet security requirements in the framework, prohibition of mixing of assets, and pushing for KYC. These minute details are well worked on a regulatory framework placed in Japan, which is nowadays emerging as a crypto friendly region.
Although it’s a big effort by Brazil going a step forward for crypto awareness, the regulatory framework consisting of licensing the firms is the initial process to start with. Furthermore, focusing on which of the digital assets is defined as security.
In 2022, Brazil was ranked in the seventh position for crypto adoption. It is the only Latin American country to be amongst the top ten. MerCado Bitcoin has nearly 3M users in the largest exchange, and it was valued at $2B in the last fundraising round.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/06/19/new-law-in-brazil-declares-central-bank-and-cvm-as-regulators/