2023-07-05 21:30:07
The legal framework for cryptoassets, sanctioned in December 2022 by former President Jair Bolsonaro, entered into force on June 20, bringing important changes and regulations to the cryptocurrency market in Brazil. To better understand the impact of these measures, we interviewed the specialist professor in crypto assets at Fundace FEA-RP-USP, Marco Botelho.
Among the main points of the new legal framework, the inclusion in the Penal Code of punishments against fraud related to virtual assets and the definition of rules for exchanges, which are cryptocurrency trading houses, stand out. The new legislation complements the existing laws that govern the financial system, providing more detailed regulation for operations involving crypto assets.
Professor Botelho points out that the new legislation is welcomed by the sector, as it brings greater clarity and security to market participants. “For the investor or buyer of cryptoassets, in practice it does not change the form of operation with the negotiation (buying and selling) nor the custody of cryptoassets”, he says. However, brokerages, or exchanges, will need to adapt to the new requirements, presenting records of operations with the Central Bank of Brazil (Bacen) and the Securities Commission (CVM) for digital assets that are considered securities.
One of the main changes brought about by the legal framework is the introduction of more severe penalties for crimes related to virtual assets. Professor Botelho explains that these crimes were already typified by financial and criminal legislation, but the new legal framework makes clear the wording of the Penal Code for crimes involving “virtual assets”. In addition, the Central Bank gains competence to supervise operations involving brokerage houses and exchanges established in the country, providing greater security to investors who use institutions registered and regulated by Bacen.
As for blockchain and fintech startups, Professor Botelho points out that the implications of the legal framework vary according to the type of crypto assets they intend to operate. For those developing blockchain to control non-traded assets like crypto assets or unique digital assets, the rules do not bring significant changes. However, fintechs that want to create new types of crypto assets for trading on the market will need to adapt to the rules that will be established by Bacen.
Greater access to crypto assets
Regarding the mass adoption of cryptocurrencies, Professor Botelho believes that the new legal framework will facilitate this process by providing greater security for investors. “Currently, many companies avoid trading with crypto assets due to insecurity regarding market participants,” he says. Despite acknowledging that regulation can cause discomfort to current participants, he points out that the massification of cryptocurrencies is only possible with more effective control and regulation mechanisms.
With regard to the response of the main cryptocurrency companies to the legal framework, Professor Botelho points out that those that already operate in Brazil, with headquarters and registrations, are in favor of regulation. “This tends to generate a greater perception of security in the country,” he says.
Safety and regulation
Regarding preventive measures against money laundering and fraud, Professor Botelho clarifies that the legal framework does not address these issues directly, since these crimes are already typified in financial legislation. However, the regulation reinforces the importance of the Central Bank and the CVM in preventing these crimes and indicates that these bodies will have the prevention of money laundering as a guideline.
With the Central Bank and CVM designated as the industry regulators, significant implications for the cryptocurrency market emerge. Professor Botelho points out that this designation makes clear the competence of these bodies in regulating the crypto-active sector, both in relation to Bacen, in general, and to the CVM, specifically in relation to digital assets that represent securities.
As for cases of fraud specializing in virtual assets and fraudulent activities involving cryptocurrencies, Professor Botelho believes that the new legal framework can contribute to the reduction of these illegal practices. However, he points out that it is unlikely that these types of crime will be completely extinguished. Even so, the regulation provides greater security for investors by making it clear that operations involving brokerages and exchanges must be carried out by duly registered companies that meet the rules established by the Central Bank.
Regarding the privacy and anonymity of cryptocurrency users, Professor Botelho points out that one of the advantages of using cryptocurrencies is the difficulty in identifying and tracking operations due to coding. However, he points out that the brokerage houses that carry out the intermediation of these cryptocurrencies have records of the transactions and generally maintain custody of the cryptocurrencies in their digital wallets. He points out that brokerages should already report balances to the Federal Revenue and that Bacen’s regulation will provide greater control over atypical operations that may indicate financial crimes. However, he points out that operations carried out in online brokerages outside the country still represent a challenge in terms of regulation and control.
penalties
As for the penalties and coercive measures provided for in the legal framework, Professor Botelho clarifies that the legal framework does not present specific punishments, as financial crimes are already typified in current legislation. The applicable administrative sanctions will be used by Bacen and CVM, in the same way as in the financial market in general.
With the inclusion of “virtual asset service providers” and the classification of specific crimes related to virtual assets, the legal framework brings significant changes to the functioning of exchanges in Brazil. Professor Botelho explains that “virtual asset service providers” are, in practice, brokerage houses and exchanges that offer digital asset intermediation services. The typification of crimes related to virtual assets clarifies the wording of the Penal Code and reinforces the need for brokers and exchanges to be duly registered and headquartered in Brazil. They must now conform to the rules that will be implemented by Bacen.
With regard to measures to prevent money laundering, Professor Botelho points out that the legal framework reinforces the importance of maintaining controls and measures to prevent money laundering. He highlights that it will be up to Bacen to create ways to prevent money laundering through the use of cryptoassets, especially cryptocurrencies, and to identify suspicious practices.
However, Professor Botelho points out that some specific rules and authorizations are still pending, which brings challenges and implications for cryptocurrency companies. He points out that Bacen’s regulatory system is known for its high level of integration and real-time control of financial operations. Therefore, brokerages and exchanges will need to adapt to the risk standards and internal controls established by Bacen.
Faced with this new legal framework, expectations are positive in the fight against cryptocurrency pyramids. Professor Botelho believes that the regulation of Bacen as a control body will make it possible to denounce and supervise companies that use terms such as cryptocurrencies and cryptoassets to apply financial scams, such as pyramids. This measure makes it clear that such operations are illegal without proper records and controls, providing greater security to investors.
Considering the uncertainties and changes in the Penal Code, Professor Botelho points out that investors and companies can better prepare themselves to operate under the new legal framework by following some recommendations. He highlights the importance of getting to know the institutions with which one intends to operate, verifying that they are duly registered and headquartered in Brazil. In addition, he emphasizes the importance of not believing promises of high risk-free financial returns and understanding the risks involved in trading crypto assets and cryptocurrencies.
With the entry into force of the new legal framework for cryptocurrencies, the sector is preparing for greater regulation and control, seeking to provide more security and confidence to investors and market participants. Although challenges and adjustments are yet to come, the expectation is that this regulation will promote a healthier and safer environment for the growth of the crypto market in Brazil.
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