Traditional financial institutions such as banks are investing more in crypto technology. They look to capitalize on the increase in crypto adoption that has seen everyday use cases for crypto. Brazil has been booming in the bear market, and today Chante at Crypto Lists takes a closer look at the nation’s current state of adoption. And, what it means for the region and wider world in general.
In what is a significant breakthrough for the Latin American region, the South American nation Brazil had its Congress pass a bill that would be of interest to the crypto industry. The Chamber of duties approved the bill proposing banks legalize crypto as a payment method facilitated by banks. In this case, it would seem regulation of crypto has been critical in enabling adoption within the mainstream.
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What does Brazil’s Congress Bill Detail?
Crypto enthusiasts from all corners of the globe are thrilled by the proposed bill by Brazil’s Congress. The bill pushes for regulation of the crypto industry in facilitating crypto payments in Brazil.
This has the impact of increasing crypto adoption not only in Brazil but the Latin American region. The newly approved regulatory framework is under code PL 4401/2021.
Brazil does not recognize crypto as legal tender like its Central American counterpart, El Salvador. The proposed bill does not change the current stand on this. It is set to serve as payment agreements under the country’s Central Bank’s supervision to include digital assets and air mileage programs in frequent traveler rewards.
How Do Crypto Payments Work?
This opens up the country and region to enjoy the benefits of cryptocurrency payments. Cryptocurrency operates as a peer-to-peer system that facilitates anyone to send and receive money without relying on third parties to verify the transaction.
The transactions are recorded on a publicly distributed ledger known as a blockchain. The blockchain also records the amount of crypto held. Crypto is not tangible but is a key that facilitates these transactions without a trusted third party.
The Impact of Passing the Bill
The bill only requires the signature of Brazil’s President to pass it into law. This would translate to the country recognizing crypto as a legal payment method for goods and services. This allows banks to integrate crypto for payment services similar to credit cards.
The global crypto industry would be able to access the Brazilian market as the law would also facilitate the issuing of licenses to various crypto exchanges and promoting custodial services for crypto by third parties. Once the bill is passed, these exchange platforms and third-party crypto custody must establish a legal entity in Brazil to operate. There is a possibility of a grace period for compliance for active crypto firms.
The downfall of the FTX crypto exchange has necessitated the requirement of crypto exchanges and service providers to make a clear distinction between the company’s funds and clients’. FTX’s exposure occurred during a bank run resulting in a liquidity crisis. The exchange was using users’ funds for its operations without holding an equivalent ratio of company and users’ assets.
The government’s executive will decide which office will supervise the regulation of the crypto industry once the President signs the bill into law. One thing guaranteed is that tokens that are defined as securities will carry on under Brazil’s Securities and Exchange Commission, CVM. The body remains to be one of the public agencies involved in crypto together with Brazil’s Central Bank.
Brazil’s Crypto Developments on the Global Stage
Crypto adoption in Brazil was underway before this newly proposed bill. Some banks already provide crypto custody, such as the subsidiary of Santander, a Spanish multinational financial services company. The subsidiary is also planning to provide crypto trading services in Brazil. One of Brazil’s largest and long-serving private banks formed in 1945, Itau, will also launch its asset tokenization platform to encourage more crypto-related activity in the country. Despite these milestones, no company provides a crypto payment service within Brazil.
The need for regulation for crypto payment services will only strengthen Brazil’s crypto adoption and welcome well-established crypto firms into the country. It continues to attract more investors with its traction in regulation and adoption. In the Latin American region, it has the most crypto ETFs. As mentioned, its major banks spearhead the exposure to crypto via crypto investments, token offerings, and custody services.
It is exciting to witness emerging economies, including Brazil, embrace crypto technology. The bear market and collapse of FTX are not dampening the surge of crypto into the mainstream.