• Brazil’s President Jair Bolsonaro has officially signed a bill into law that establishes a comprehensive regulatory framework for bitcoin trading and use in the country.
• The new law recognizes bitcoin as a digital representation of value that can be used as a means of payment and as an investment asset.
• The executive branch will select the government bodies that will oversee the market, with the expectation that the Central Bank of Brazil will be in charge when bitcoin is used as payment, and the country’s securities and exchange commission will be the watchdog when it is used as an investment asset.
On Thursday morning, Brazilian President Jair Bolsonaro officially signed a bill into law that creates a comprehensive regulatory framework for the trading and use of bitcoin in the country. The new law, which was published in the federal government’s official journal (DOU), was enacted without any modifications and will go into effect 180 days after the president’s signature.
The law recognizes bitcoin as a digital representation of value that can be used as both a means of payment and an investment asset. It defines a virtual asset as “a digital representation of value that can be negotiated or transferred electronically and used for payments or as an investment.” However, it should be noted that the law does not make bitcoin or any cryptocurrency a legal tender in the country.
The executive branch will now select the government bodies that will oversee the market. It is expected that the Central Bank of Brazil (BCB) will be in charge when bitcoin is used as payment, while the country’s securities and exchange commission (CVM) will be the watchdog when it is used as an investment asset. Both the BCB and the CVM, along with the federal tax authority (RFB), had a part in crafting the overhaul legislation.
If the BCB is confirmed as the sector’s watchdog, the outlook isn’t particularly optimistic. While the regulator cannot override the definition of a virtual asset determined by the law, there is little reason to believe that the BCB will go out of its way to promote the adoption of bitcoin in Brazil. Despite this, the legitimacy conferred upon BTC’s use case as payment is meaningful and could spur greater activity in the country. How much this will happen, however, is dependent on the actions of the regulator in charge.