The Brazilian regulators have approved a legal framework for the trading and use of cryptocurrencies in the country, which also raises the question of why there is a need for a legal sanction for cryptocurrencies.
Why is the legal status of crypto payment important?
The development of human society is always associated with the development of science and technology and is marked by major industrial revolutions. These industrial revolutions created many achievements and brought many benefits to people, improving labor productivity and the value of life.
The world today is in the development phase of the industrial revolution 4.0. This revolution has created many new products, new forms of transactions, new payment methods, new types of assets… One of the remarkable innovations of this revolution is Blockchain and crypto currency.
The emergence of cryptocurrencies is receiving global attention and concern, especially in 2017, when the price of many cryptocurrencies increased rapidly and changed constantly. Activities of issuing, storing, mining, trading, investing… cryptos are active and diverse, attracting a large number of participants. These activities bring significant challenges to researchers, lawmakers and regulators. That is the reason why the legal status of crypto payment is really important in the current context.
In order to manage and use cryptocurrencies, it is necessary to start with the formation of the concept and legal framework. Currently, mainly the concepts of virtual money, electronic money, and cryptocurrency have not been agreed on a global scale.Those concepts are mostly defined by financial institutions and economists, while a legal concept of the nature of cryptocurrency is still open. These loopholes can create a chance for scammers to perform fraudulent activities.
Creating a legal framework for cryptocurrencies will help protect investors and maintain financial stability while allowing innovation and fostering the attractiveness of the crypto asset sector. In addition, it will also help the government collect taxes as well as have legal remedies for legal issues such as money laundering or terrorist financing.
Crypto payments legalized in Brazil
Brazil’s House of Representatives has approved a legal framework that legalizes the use of cryptocurrencies as a method of payment, giving a regulatory boost to digital currency adoption and expanding the ecosystem. However, cryptocurrencies are not yet considered an official currency in the country.
All information and regulations are given in document PL 4401/2021, on the “payment agreement” under the supervision of the Central Bank of Brazil in the field of electronic money.
The law has been approved and is only waiting for an official confirmation from the President to be enacted, providing legal status for payments in cryptocurrency for goods and services. However, it should be noted that cryptocurrencies are still being considered as assets, not official currencies.
“With this property, you will be able to buy a house, a car, go to McDonald’s to buy a hamburger and it will be a domestic currency as it has been in other countries.”- Federal Deputy Minister Aureo Ribeiro.shared.
Brazil has made significant progress in terms of regulation and acceptance of cryptocurrencies. This is currently the country with the most crypto ETFs funds in Latin America, most of the country’s major banks and brokerage services are now providing services to help users access investments, electronic money custody.
Once the law is implemented, the government executive branch will decide which agency or office is responsible for overseeing payments. In addition, the law establishes rules for the operation of cryptocurrency exchange platforms, as well as cryptocurrency custody and management services by domestic organizations and trusted third parties. The Brazilian Securities Regulatory Authority (CVM) will also be actively working to classify tokens as securities and regulate this category.
In addition, the law would require exchanges to clearly distinguish between company funds and user funds, to avoid another incident like the collapse of FTX.
The investor community in Brazil in particular and the whole world in general is still waiting for an official decision on the issuance of a Central Bank Digital Currency (CBDC), but in the new law, the issue of this has not been mentioned yet.
More and more countries accept payments in cryptocurrencies. From small countries like El Salvador, Zimbabwe… to big countries like the US, Russia or Brazil, all are planning to use cryptocurrency for payment purposes.
