Brazil has introduced a new law that passes regulation of crypto firms to the country’s central bank. President Luiz Inácio Lula da Silva (Lula) signed the law increasing the central bank’s duties and extending them to crypto oversight.
On Wednesday, the president signed decree No. 11.563 in compliance with a legal framework introduced in Brazil in December last year. In addition to the central bank’s oversight function, the new decree states that tokens considered securities will be controlled and regulated by Comissão de Valores Maobiliários (CVM), Brazil’s Securities and Exchange Commission.
The law will officially begin to apply on June 20 as the regulator functions with consideration to the increasing volume of cryptocurrency transactions in the nation.
Brazil’s CBDC Pilot
In March, Brazil launched an experimental central bank digital currency (CBDC) to “support the provision of retail financial services.” According to the project coordinator, Fabio Araujo, the CBDC could improve the country’s financial climate. Araujo said it could plunge costs associated with credit and increase general returns on investments. Furthermore, Araujo said the CBDC would help new service providers to decentralize market access. He also specified that the CBDC could ease up certain operations monopolized by banks as the market becomes democratized.
Araujo added that public use of digital currency may not be possible until 2024 ends. Before then, the central bank should have completed several rounds of testing, including trading federal public bonds.
By the end of May, Brazil’s central bank confirmed 14 participants for the ongoing CBDC pilot project. The current phase of the pilot is to test privacy and functions that allow easy exchange of information between participants. The confirmed participants were shortlisted from 36 bids the organization received from over 100 institutions. The list features an interesting array of organizations, including crypto firms, payment solution merchants, and banks. Notable names are Microsoft, Santander, AWS, and Nubank. The announcement says the confirmed participants will begin to access the pilot platform in mid-June.
Brazil’s Law Guiding Crypto Firms and Regulation
In December, former President Jair Bolsonaro approved a crypto bill that authorized crypto payments. Following the assent, banks could offer services that let anyone trade goods and services and make payments in crypto. However, the bill did not expressly confirm that cryptocurrencies are legal tender.
The bill also specified requirements for crypto firms. According to its details, crypto firms in Brazil must obtain virtual asset service provider licenses. In addition to receiving a license, crypto firms in Brazil must keep their funds separate from customer funds.
Anyone guilty of using crypto to commit fraud risks a fine and up to six years in prison. At the time, the bill did not specify the agency responsible for regulating crypto transactions.