Brazil seeks executive assent as it moves closer to robust digital asset legal framework

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Brazil has been calling for a piece of legislation that will govern its growing digital asset industry—and after nearly seven years, the coast appears to be clear for the bill.

The country’s Chamber of Deputies voted to pass the digital asset bill into law on Tuesday after years of legislative back and forth. Industry stakeholders are bracing themselves for the sweeping changes the bill could introduce to the ecosystem, but there remains one last hurdle.

Brazilian President Jair Bolsonaro has to sign the bill, but his term in office will elapse on December 31 and it remains unclear if the outgoing president will ink this into law.

The bill created a new crime, with the elements being fraud through digital assets. Under its provisions, firms operating in the virtual asset industry will have to obtain a “virtual service provider” license from the regulatory body in charge of the asset class.

Virtual currencies falling under the categorization of securities will be regulated by the Brazilian Securities and Exchange Commission (CVM), while legal experts believe that assets that are not considered securities may be under the purview of the central bank.

The bill had sailed through the Senate but faced significant opposition in the Chamber of Deputies over certain sections. One key issue was the provision of whether digital asset exchanges will follow the guidelines for segregating clients’ funds.

Curtailing irregularity in Brazil’s digital assets industry

Pushing the bill to the president’s desk comes at a time when the Brazilian digital asset industry is reeling from multiple scandals of fraud. A high-profile case in 2021 saw the police seize 591 BTC, worth nearly $30 million, from a company accused of running a pyramid scheme.

Aside from cracking down on bad actors in the space, the proposed legislation seeks to create a regulatory blueprint to cater to the burgeoning ecosystem. Brazil ranks seventh on Chainalysis’ Global Crypto Adoption Index as individuals turn to digital currencies to hedge against the country’s galloping inflation.

In the last 12 months, Brazil has received nearly $150 million worth of digital currencies, which places it ahead of any other South American country. Shortly after El Salvador elevated BTC to legal tender, analysts predicted that Brazil might be the next country in the region to do the same, but 12 months on, legislators have been stuck with the long-awaited digital asset bill.

Watch: The BSV Global Blockchain Convention panel, Law & Order: Regulatory Compliance for Blockchain & Digital Assets