- Brazil is not turning Bitcoin into a legal tender.
- Brazil’s “Virtual Assets” bill seeks to increase investor protection by defining and increasing control over virtual assets and virtual asset service providers.
- The Central Bank of Brazil is more focused on creating its CBDC, Digital Real.
Over the past few weeks, the approval of the Bitcoin law in a special committee of the Brazilian Chamber of Deputies has made many in the bitcoin space think that the country will follow El Salvador and make Bitcoin a legal tender. Including newspapers Yahoo Finance And Investing.com, Led by a wider audience, believes that BTC will soon be accepted as a legal tender in Brazil.
That’s not the point. The bill not only mentions this approach, but Central Bank of Brazil (BCB) Governor Roberto Campos Neto has repeatedly said that legal tender for bitcoin in the country is not on his agenda.
The bill, PL 2303/15, was approved by the special committee of the chamber on September 29 and is now going to the plenary for consideration, but whether the deputies will vote in the plenary will depend on the agreement between the party leaders. The Senate follows, and the last step for the Presidency Desk Bill.
Contrary to rumors, the bill does not attempt to legalize bitcoin in Brazil. Instead, it seeks to increase the protection of investors with strict controls for the company’s involvement in “virtual assets,” according to the bill, providing either trading or custody solutions.
The law identifies “virtual assets” as property – Any digital representation of value that can be negotiated or transferred electronically and used as a means of investment or payment. This definition may be responsible for confusion and misinformation, but using something as a payment method does not make it a legal tender. For example, Brazilians can use airline miles for air tickets, daily consumer goods and hotel stays, but they are not legal tenders.
Digital representation of legal assets such as national and foreign currency, electronic currency, mileage or similar loyalty programs, and real estate and financial assets is not considered a virtual asset.
The bill considers “virtual resource service providers” to be any corporation that operates at least one of the “virtual resource services” on behalf of third parties. Virtual asset service is the exchange or sale of virtual assets from fiat currencies and exchanges between virtual assets, transfer of virtual assets, custody, and offers by providers with the participation of financial services and service providers.
Companies interested in the “virtual asset” space will only be allowed to operate in the country if they register and obtain a permit, which may require the approval of the entities of the Brazilian Federal Public Administration. The executive will determine which entity or entity of public administration will control the industry and its companies and which will control the virtual assets.
The BCB is moving fast to create the Brazilian Central Bank Digital Currency (CBDC), the digital version of the country’s national currency, the real. In May, the BCB released ten guidelines for the development of digital real.
Campos Neto wants to launch CBDC in Brazil in the next few years. In July, a series of seven webinars, “The Digital Real,” was scheduled to take place between that month and November. The goal is to discuss with the Brazilian community the ten guidelines posted in May, the use of research that could benefit from CBDC, and the most appropriate technologies for implementing digital real.
The power of digital real, data security details and privacy, offline operations, smart contracts and the Internet of Things (IoT) have been discussed in four webinars over the past few months. The fifth webinar will be held tomorrow, October 19, to discuss the issue, distribution, custody and destruction strategies of Digital Real. The final two webinars will deal with the issues of international integration requirements and issues with existing systems and technology for inter-operability.
Campos Neto was very vocal about digital real and bitcoin, but the governor showed more interest in developing CBDC in Brazil than accepting BTC as a legal tender. The BCB explained that a digital real would rely on instant payments, an open system and a convertible currency.
Brazil’s banking system already enjoys instant payments and transfers. Introduced in 2020, a new payment system, PIX, allows anyone who has a bank account to instantly transfer money to another bank account and pay a merchant without any fees.
Brazil’s open system is currently being phased in with “open banking” and “open finance” initiatives. Both organizations and customers want to integrate so that information can be shared at the discretion of customers so that customers maintain control over their data. The initiative will be finalized in December 2021.
The third and final way to make digital real a reality is currently awaiting a vote by the Senate. Bill 5.387 / 19 is one of the priorities of the government and seeks to simplify and modernize the Brazilian exchange market, Brazilian capital abroad, Brazilian foreign capital and the BCB.
Bitcoin is far from being a legal tender in Brazil
In short, it is clear, the Bitcoin and Cryptocurrency Bill is currently advancing at various stages of official approval, BCB Activities and Campus Neto comment, that Brazil will not make legal tenders to BTC any time soon. That is not in the plan of BCB or the government.
What is happening in Brazil is the increase in regulatory investigations into companies in the “virtual asset” space to “increase investor protection”. The ability to use Bitcoin and cryptocurrency as payment for products and services such as Airlines Miles and other loyalty programs will not turn BTC or any other virtual asset into a legal tender in the country. Instead, the BCB has focused on the issues it can control.