Bitcoin: BC becomes cryptocurrency market regulator – 06/14/2023 – Market

The government of President Luiz Inácio Lula da Silva (PT) determined that the Central Bank will regulate the crypto market in the country, such as bitcoin and ethereum.

The decree, signed by the Chief Executive, was published this Wednesday (14), in the Official Gazette.

The text establishes that the monetary authority will regulate the provision of services for these virtual assets; regulate, authorize and supervise service providers; and deliberate on other issues involving the theme.

The decree also specifies that the rules of the CVM (Comissão de Valores Mobiliários) continue to apply in the case of assets representing securities – securities or collective investment contracts publicly offered.

BC’s choice for the mission was already expected by agents in the sector, even though until then it had not been defined. At the end of last year, after seven years of processing, the Chamber of Deputies approved a bill that regulates the crypto market in national territory.

The text approved by Congress did not specify a regulatory body for the activity, but stated that it is incumbent upon the Executive Branch to assign to one or more public bodies the discipline of functioning and supervision of the provider of virtual asset services.

Therefore, there was an expectation that the Central Bank would be appointed – which had already shown interest in assuming responsibility. It was also expected that, even if the monetary authority were chosen, the regulation of digital assets representing securities would remain the responsibility of the CVM, as stated in the decree published this Wednesday.

The law approved by parliamentarians provides for guidelines to be observed in the activities and regulation of virtual asset service providers.

These assets have been defined by legislation as a digital representation of value that can be traded or transferred and used for payment or investment purposes. The law provides a very generic definition and, to avoid noise, makes some exceptions explicit.

Loyalty and mileage programs, as well as fiduciary currencies, are not included in this definition. This means that the digital real –which is being developed by the BC– will not be governed by this legislation.

The approved bill requires companies operating in the crypto market to be headquartered in Brazil. The final version of the text, however, excluded the issue of asset segregation – a legal device that would prevent brokerages from using investor funds for their own operations.

The regulatory framework also provides for punishments in different spheres. The Penal Code now considers fraud involving the use of virtual assets, securities or financial assets as a case of embezzlement, with a penalty of four to eight years in prison, in addition to a fine. The period of imprisonment may be increased by one to two thirds if the offenses are committed repeatedly.

In the criminal sphere, anyone who “organizes, manages, offers or distributes portfolios or intermediates operations involving virtual assets, securities or any financial assets with the aim of obtaining illicit advantage, to the detriment of others, inducing or keeping someone in error, by artifice, ruse or any other fraudulent means.”