The legislation, which the lower chamber has yet to approve but was approved by the senate earlier this year, would require all domestically operating cryptocurrency providers to have a physical presence in the nation.
Following the collapse of FTX, once the darling of the industry, advocates for cryptocurrencies in Brazil are pleading with lawmakers to approve a bill intended to strengthen oversight of the sector. This is because unregulated digital currencies are now even more of a concern due to FTX’s demise.
The regulation had been “sort of inactive” throughout the election season, according to Roberto Dagnoni, a key executive at SoftBank-backed exchange Mercado Bitcoin. Still, it now needed to be a priority. If the FTX debacle has a silver lining, it is that the law is now given priority, he told Reuters on Tuesday. Some players have been exempt from the present restrictions, thus they are free to act in whatever they like. Much would change if this bill passed.
The bill, which was approved by the senate earlier this year and is now awaiting action by the lower chamber, would require all locally active cryptocurrency providers to have a physical presence in the nation and require the disclosure of any suspicions of money laundering and other criminal activity. For violations, the text lists penalties and possibly jail.
According to research from 2022 Chainalysis, Brazil is one of the top 10 most active markets worldwide for cryptocurrencies.
The previous leader of the nation’s blockchain organization, Fernando Furlan, expressed hope that the FTX scandal would be “a push enough” to approve the law.
Furlan continued, saying that while the law’s stricter reporting requirements may make it more difficult for smaller organizations and so-called “dot com” crypto exchanges to function, this was a worthwhile trade-off. It’s a terrific regulation, he said, “if it benefits Brazilian investors.” It’s possible that the measure will be passed sooner than anticipated. Lower House Speaker Arthur Lira was quoted by Folha de So Paulo as indicating last week that the house was prepared to vote on the measure before the year ended.
In a public panel, the head of Brazil’s securities regulator said that “it is vital that we start having laws” for cryptocurrencies and that the legislation “is very close.” However, given the 2023 financial concerns that have gained precedence since Luiz Inacio Lula da Silva’s electoral victory, several important players doubt the law would be passed so swiftly. A request for comment from Lira did not receive a prompt response.
Following accusations that $10 billion in client funds were transferred from the cryptocurrency exchange to FTX founder Sam Bankman-trading Fried’s firm Alameda Research, FTX filed for bankruptcy last week and is now under investigation by American authorities. In Latin America, FTX did not have a major presence.
Mercado Bitcoin, which is mostly operating in Brazil and Portugal, has no exposure to FTX, according to Dagnoni, who also noted that the company has created its own custody solution to keep customer assets. In spite of widespread withdrawals, he said, his exchange had even had “net positive” volume flows. He stated, “I think people are distinguishing between the asset and poor management.
