Brazil’s approach towards crypto

The popularity of cryptocurrencies in Brazil is increasing rapidly. The 2022 Global State of Crypto presented by Gemini — an international cryptocurrency exchange, wallet and custodian provider — concludes that Brazil is the leader in cryptocurrency adoption in Latin America: 41% of adults own cryptocurrencies and, interestingly, half of them procured their first coins in 2021. This trend can likewise be observed when looking at the reports from the Receita Federal do Brasil — the Brazilian tax Authority: In July 2022 the largest number of submissions of cryptocurrency statements was recorded since reporting to the Authority became mandatory in 2019, with a steep increase in the recent months. Further, in July 2022, Nubank — the largest Brazilian digital bank by market value — disclosed to have gained 1 million users on its crypto trading platform, just one month after its launch in June 2022.

This trend happens without Brazil having adopted a comprehensive regulatory framework with targeted laws for the blockchain/DLT technology itself, nor its applications, such as digital assets, till date (12.01.2023). However, a patchwork of documents issued by various Authorities guide users and businesses active in the space. For example, the Communiqué 31,379 (November 16, 2017) issued by the Banco Central do Brasil — the Central Bank of Brazil — states that when firms carry out international wire transfers using virtual currencies, they must comply with foreign exchange rules and that when virtual currencies are used in illegal activities, public authorities have the right to investigate the owner.

Starting already in 2015, several attempts were made to introduce a comprehensive regulatory framework covering the blockchain technology and its applications. Since then, various bills have been proposed, but after discussions archived. Yet, through the merge of two major proposals the most recent Bill originated, which is seen to “set the stage for the creation of a regulatory framework for the country’s crypto industry”. The Senat approved this Bill in April 2022, the Congress in November 2022 and the President in December 2022.

Further, in mid-2020, the Banco Central do Brasil started to evaluate the possibility of introducing a national central bank digital currency (CBDC) — named Digital Brazilian Real — as well as its potential benefits and impacts. To support this, the LIFT Challenge was launched in 2021 to assess the use case of a CBDC, to develop a minimal viable product (MVP) and to evaluate further innovative solutions that may benefit the wider national financial system. This month, Roberto Campos Neto — the president of the Banco Central do Brasil — announced that tests of the Digital Real have started, and that its launch is planned for 2023.

The greater vision of the Banco Central do Brasil is according to Roberto Campos Neto to align and unite cryptocurrencies and crypto assets with the Brazilian Open Banking environment, the Digital Real and PIX – an instant payment solution launched by the Banco Central do Brasil that enables users to send and receive payment transfers in real-time — with the goal to connect all the services in a digital wallet format in a new interoperable system. One example of how these systems work together is the integration of PIX into cryptocurrency exchanges, which allows the users to purchase cryptocurrencies with Brazilian Reals.

Lastly, various initiatives with the aim to drive the adoption of the blockchain/DLT technology in Brazil have been launched by the private sector. SyntiFi for instance supports its community members in developing blockchain/web3 applications and connects them with global opportunities, while it at the same time acts as a gateway for international on-chain risk intelligence applications to the Latin American region.

Posted on September, 30th 2022, last updated on January, 12th 2023