Brazilian Senate Committee Approves Cryptocurrency Regulation

This Tuesday, the Senate Committee on Economic Affairs (CAE) voted and unanimously approved Senator Irajá’s (PSD-TO) report on the project that aims to regulate financial transactions made with cryptocurrencies in Brazil.

The project was approved by CAE on a final basis. Therefore, it will not pass a vote on the Senate floor.

The text goes straight for analysis by the Chamber of Deputies and, if approved without amendment, goes to presidential sanction. There is no deadline, however, for this to happen.

The text voted on this Tuesday is authored by Senator Flávio Arns (Rede-PR) and Senator Irajá Abreu (PSD-TO) is the draftsman of the proposal.

Cryptocurrency regulation in Brazil

The idea of ​​the project is to regulate the crypto market that has grown substantially in recent years in Brazil. In addition, the proposal aims to provide more legal certainty for companies and investors. Still, it is desired to adapt the existing legislation to the technological evolution of the market.

As reported, Senator Irajá presented a replacement for the Arns project in December 2021.

He also recommended shelving other matters along the same lines. However, he informed that his text welcomed suggestions from the other proposals.

The senator defends the importance of creating a more transparent business environment for cryptocurrencies through a regulatory framework.

According to him, cryptocurrency companies operating in Brazil are not expressly subject to regulation, either by the Central Bank or the Securities and Exchange Commission (CVM).

Irajá explained that this makes it more difficult for the public authorities to identify suspicious transactions.

Digital assets and service providers

The substitute presented by the senator frames cryptoassets as the digital representation of value that can be traded or transferred by electronic means. These digital assets can be used either for making payments or for investment purposes.

It is worth noting that the Central Bank – which also wants to regulate cryptocurrencies – advocates that they be regulated as investment products, as this is their most common use in Brazil.

Meanwhile, companies providing services with digital currencies are classified in the text as those that perform, on behalf of third parties, at least one of the following services: redemption of cryptocurrencies (crypto-fiat); exchange between cryptocurrencies; transfer of digital assets; custody or administration of these assets; or participation in financial services related to the offering by an issuer or the sale of digital assets.

The rapporteur wants the Executive to establish norms for cryptocurrencies that are in line with international standards. That’s because he wants to curb the use of crypto-assets for money laundering, hiding assets and financial scams.

Customer identification

In this sense, the project requires cryptocurrency service providers to identify their customers. In addition, they must keep a record of every transaction that exceeds the specified limit.

If the negotiation exceeds this ceiling, companies will have to notify the Financial Activities Control Council (Coaf) within 24 hours.

Also, the project wants to include in the Penal Code the crime of fraud with cryptocurrencies, defining it as follows:

“Organizing, managing, offering portfolios or intermediating operations involving virtual assets, in order to obtain an unlawful advantage, to the detriment of others, inducing or keeping someone in error, through artifice, ruse, or any other fraudulent means”.

According to Irajá, the objective of this regulatory framework is to stimulate the business environment, not to stifle it. Instead, create mechanisms that can protect investors, individuals and legal entities, professionals, etc.