Robert Steinadler, 2 months ago

Brazil legally recognizes crypto as payment method

Crypto is still a young technology and this status begets that many regulatory issues remain unsolved in most parts of the world. The EU is about to introduce a unified regulatory framework that will approximately come into full effect in 2024. Yesterday, Brazil has made an important step towards accepting crypto.

What kind of legal status do cryptocurrencies have with the new regulatory approach in Brazil?

Crypto as a payment method

Cryptocurrencies like Bitcoin are considered to be a means of payments by most proponents. However, this also requires a legal status that is in accordance with this view on the technology and the digital assets that are involved.

It was Tuesday when a draft was voted on by the Chamber of Deputies in Brazil that effectively gives cryptocurrency the aforementioned status. This step is considered to be significant for the crypto industry in the country since it provides clarity what digital asset are and how the law is treating them. It is expected that this clarity will provide the foundation for growth of the industry within the next three years.

The law still needs to be signed by the president to be enacted. Once that is done, cryptocurrencies can be officially used to pay for goods and services in Brazil.

There is still a catch

While this is indeed good news, there is still a difference between Brazilian legislation and the laws in El Salvador. Many countries have opted to recognize crypto as means of payment. So far, only El Salvador has dared to make Bitcoin legal tender.

With the recent development in Brazil, neither Bitcoin nor any other digital asset is recognized as a currency. This is not a minor detail. It affects many aspects of trade such as the taxation when using crypto for payments. Overall, this is a small step for crypto, but a big step for Brazil.

Along with clarifying the legal status the law also includes guidelines for customer protection and what kind of requirements have to be met by exchange businesses. It also includes regulation of digital assets that are considered to be a security. Those will be under oversight of the CVM, the equivalent of the SEC in Brazil. Given the fact that the SEC is still fighting Ripple in court over whether XRP is a security in the US, this clarity is much needed. Brazilian investors can rest assured that there is a strict distinction between crypto and tokenized assets that are considered to be security.

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