The BC (Central Bank) published this Friday (29 November 2024) a notice of public consultation with a regulatory proposal to include the activities and operations of virtual asset service providers in the foreign exchange market, and also bringing situations subject to control international capital regulation.
According to the monetary authority, the objective is “to provide legal certainty in the provision of these services to citizens and businesses, and also to increase the competitiveness and efficiency of the foreign exchange market and international capital operations, through the submission of a regulation proportional to the risk of the activities”.
The Central Bank also informs that the proposal submitted to public consultation is available on Participa + Brasil, a government platform. Contributions can be made until February 28, 2025.
The regulation of the matter follows what was stated in law 14.478 of 2022, which established the legal framework for cryptoassets. The regulatory text presented in the public consultation notice establishes that the activities of virtual asset service providers include:
- international payments and transfers through the transmission of virtual assets;
- exchange or custody of virtual assets denominated in reais by a non-resident client; AND
- transactions with virtual assets denominated in foreign currency.
Moreover,the definition of rules for the use of virtual assets in reais by non-residents is envisaged,as well as the limitation that the transfer of virtual assets in foreign currency between residents is carried out only in cases where the legislation already authorizes this type of payment. .
Investment operations in international capital carried out through virtual assets will also have to follow the same rules applied to investments made with other methods. All external credit operations,foreign direct investments and Brazilian capital abroad that involve the transmission of virtual goods are also subject to this regulation.
Engaging Interview: Navigating the Future of Virtual Asset Regulation
Editor (Time.news): Welcome, and thank you for joining us today to discuss the recent public consultation announced by the Central Bank regarding the regulation of virtual asset service providers. Can you start by outlining the key objectives of this regulatory proposal?
Expert: Thank you for having me. The Central Bank’s recent notice aims to provide legal certainty for virtual asset services, significantly enhancing the competitiveness and efficiency of the foreign exchange market. This regulatory framework seeks to mitigate risks associated with these activities while ensuring that citizens and businesses can engage with virtual assets confidently. It also aligns with the provisions of law 14.478, established last year, which set the legal groundwork for cryptoassets in the country.
Editor: That makes sense. What are some of the specific activities that will be covered under this new regulation?
Expert: The regulation will encompass several crucial activities of virtual asset service providers. These include international payments and transfers facilitated through virtual asset transmission, exchange or custody of virtual assets for non-resident clients, and transactions involving virtual assets denominated in foreign currency. Additionally, the regulation defines how non-residents can use virtual assets in reais and sets limitations on the transfer of these assets between residents according to existing legislation.
Editor: It sounds like there’s a strong emphasis on compliance and oversight. What do you think are the implications of these proposed rules for the virtual assets industry in Brazil?
Expert: The implications are significant. by standardizing the operation of virtual asset service providers, the Central Bank is effectively creating a safer surroundings for both consumers and businesses. This could perhaps attract more international players into the Brazilian market, fostering innovation and facilitating smoother operations across borders. Tho, it also means that industry participants will need to adapt quickly to comply with these regulations, which may require additional investment in compliance infrastructure.
editor: Speaking of adaptation, what practical advice would you offer to businesses and individuals involved in the virtual asset space to prepare for these upcoming changes?
Expert: First and foremost, stakeholders should stay informed about the specifics of the public consultation available on the Participa + Brasil platform. I encourage businesses to participate actively in the consultation process before it closes on February 28, 2025. Engaging with the proposed regulations can provide feedback that shapes the final rules. Additionally,businesses should begin to assess their current operations against the anticipated requirements,ensuring that they have clear compliance plans and risk management strategies in place.
Editor: With this regulatory framework potentially impacting international capital operations as well,what should investors know?
Expert: Investors should be aware that investment operations involving virtual assets will now be governed by the same rules applied to traditional investment methods. This means a need for due diligence and compliance with all regulations regarding foreign credit operations and investments. Understanding how these rules interact with traditional financial systems will be crucial when considering foreign direct investments and capital transmissions involving virtual goods.
Editor: Thank you for those insights. Given the evolution of financial markets, how do you see the future of virtual assets evolving in Brazil?
Expert: The future appears promising, with a clear direction toward regulation fostering a more secure landscape for all participants. As legal frameworks become more robust, we can expect increased adoption of virtual assets across various sectors in Brazil. This will likely lead to greater integration with existing financial systems, paving the way for innovation and the development of new financial products and services that leverage the distinct advantages of virtual assets.
editor: This has been an enlightening discussion. Thank you for sharing your expertise on the evolving landscape of virtual asset regulation in Brazil.
Expert: Thank you for having me! It’s crucial that we keep these conversations going as the industry continues to develop.