Brazil embraces crypto, names central bank as regulator

Government Decree Lula signed Wed It will lay down the rules outlined in the December Act, which established a legal framework and definitions for cryptocurrencies. The new rules come into effect on June 20 and will allow the Brazilian Central Bank to decide which companies can operate in the market. It also retains the authority to regulate tokenized securities with the equivalent of the country’s Securities and Exchange Commission, Comissão de Valores Mobiliários, or CVM.

The law defines cryptocurrencies and virtual asset service providers, and enforces laws to prevent money laundering and terrorist financing, with non-compliance potentially resulting in jail time, According to Bloomberg.

The central bank is now required to establish a licensing system for virtual asset service providers, and all companies operating in the country must register. A cryptocurrency framework can attract more companies and clients to the industry. Brazil is already home to Mercado Bitcoin, an exchange with more than 3 million customers It hosts over $5 billion in trading volume.

The law still has some shortcomings. It does address some of the segregation of assets for the exchanges to prevent mixing of customer funds, a key allegation in the case against FTX. Nor does it clearly define which digital assets are securities.

But the new rules are a step forward in setting clear expectations and penalties for the crypto industry, and come weeks after Brazil launched a pilot program with major banks to test its central bank digital currency, digital real.

Brazil’s approach contrasts with that of the United States Last week, the Securities and Exchange Commission sued two of the largest crypto firms, Binance and Coinbase, for allegedly offering unregistered securities to US citizens. SEC Chairman Gary Gensler has often stated that the crypto industry is the “wild west,” and compared stablecoins to “casino chips.”