Brazil’s Cryptocurrency Law Approved – Ignores Issues With Asset Segregation And Tax Exemptions For Green Mining
The Chamber of Deputies accepted the 4.041/2021 cryptocurrency law project during its meeting on November 29. President Jair Bolsonaro must ratify the law project before it can be declared law. Most of the Senate’s suggested revisions were rejected by the deputies, allowing the bill to be enacted in a broader form and creating the possibility for the eventual formulation of more detailed provisions.
The bill’s rapporteur, Deputy Expeditto Neto, spoke on the significance of this law for the nation. He said:
“We are voting on a historic matter. Today, the country is ahead of others when it regulates activity with digital assets. We have the support of the current government and the future government for the matter.”
According to local media reports, the debate of the law was rushed because it was unclear what position the administration of president-elect Luis Inacio Lula Da Silva would take on the issue. Some deputies claimed that the bill might encounter opposition from the new administration, which is scheduled to take office on January 1. The planned tax reduction for bitcoin mining businesses that employ renewable energy was omitted from the final agreement. The project’s rapporteur acknowledged that another measure about this issue should specify tax-related rules.
Another difficulty was the problem of customer asset segregation, which required virtual asset service providers to keep their own money distinct from their clients. It was one of the primary topics of debate, and many deputies backed it so that consumers could prevent losing money, like what happened when the popular cryptocurrency exchange FTX recently collapsed. Analysts who supported the anti-segregation side claimed that by not using client cash to operate, brokerage firms and other regional businesses might only be able to offer spot-based trading goods.
With the ratification of the crypto law, the government may now begin to regulate VASPs and other businesses that employ cryptocurrencies nationwide. The executive will choose this regulator, and maybe the Central Bank of Brazil or another particular organization. Many analysts think this is just the beginning of the regulation, and they anticipate that the legislation will start to be applied in the following years. More detailed regulations will start to emerge. Isac Costa, a partner of Warde Advogados, stated the following:
“Perhaps the law will take up to two years to have any practical effect, which leads me to believe that its approval is a merely symbolic act.”
It is because the measure was authorized with extremely broad guidelines that need further expansion in other bills. However, a digital law expert named Marcelo Castro claims that the statute creates a foundation that would “provide subsidy for future infra-legal regulation.”