Brazilian Federal Deputy proposes to give digital currencies new status and legal recognition

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Federal Deputy Paulo Martins has proposed to amend an existing Brazilian law to allow digital currencies to be used for payments without giving them legal tender status.

Martins’ proposal, which was submitted to the parliament, is targeted at modifying Article 835 of Brazil’s Civil Procedure Code. It will add that while digital currencies are not currencies in and of themselves, they can be “used as financial asset, means of exchange or payment, or instrument of access to goods and services or investment.”

The proposed amendment would give digital assets the status of financial assets for investments and other uses. The deputy adds that the proposal would provide the legal system with new powers over digital assets.

One of these is the ability to confiscate digital assets. Courts will be able to freeze digital assets held by a debtor with intermediaries like exchanges. They will also be able to hold and liquidate digital assets to settle debts.

“In the event that the debtor’s assets are not located, the creditor may request the competent Court to issue an ex officio, by electronic means, to the intermediaries involved in operations with crypto-assets, so that assets corresponding to the amount executed are blocked,” the bill states.

However, the proposal specifies succinctly that courts cannot seize the private keys of users of non-custodial wallets. The user will have to send their assets to the court’s wallet to authenticate their validity.

The proposal is still in the early stages of discussion in the Chamber of Deputies and may take several years and modifications before being passed into law. It is also the only latest proposal in the Brazilian legislative pipeline targeted at digital currencies.

Brazil’s digital currency regulatory landscape taking shape

The Latin American country has been making significant progress in providing regulatory clarity for digital currencies. In April, the parliament passed a draft bill seeking to regulate the digital currencies sector.

The bill has been forwarded to the President for his signature and will give the executive powers to create oversight bodies for the industry. It also recognizes digital assets as “digital representations of value that can be traded or transferred by electronic means.”

More recently, the Senate passed a controversial amendment that will tax digital currency transactions whether or not they involve fiat currencies.

Brazil has also been exploring the creation of a central bank digital currency (CBDC). The Banco Central do Brasil (BCB) is partnering with several companies for its development and pilot testing. The CBDC platform is intended to complement the central bank’s mobile payment platform, Pix, which now has over 150 million users, as Bloomberg reports.

Watch: The BSV Global Blockchain Convention panel, Blockchain for Government Data & Applications

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