Chamber of Deputies approves Cryptocurrency Bill in Brazil

On November 29, 2021, Brazil’s Chamber of Deputies (Câmara dos Deputados) approved a bill that provides rules for cryptocurrency trading. The bill will now proceed to presidential sanction.

Below are the amendments made to the Brazilian Senate's substitute text, as well as the main elements that were kept the same.

Public agencies
A new feature in the Senate substitute text is the permission for public administration bodies and entities to keep accounts with these companies and carry out operations with virtual assets and derivatives in accordance with the Executive Branch's regulations.

Central Bank
Because it is a project of parliamentary initiative, it was not possible to explicitly mention that the Central Bank will be the regulator.

The regulatory body in question will establish conditions and deadlines, not less than six months, for compliance of active digital asset service providers with project rules.

Some of the regulatory body’s attributions are the following: (i) to authorize the operation, transfer of control and other share movements by digital asset service providers; (ii) to establish conditions for positions to be held in statutory and contractual bodies within digital asset service providers; (iii) to supervise these providers; (iv) to cancel authorizations, ex officio or upon request; and (v) to establish the hypotheses in which activities will be included in the exchange market or are to be subject to the regulation of Brazilian capital abroad and of foreign capital within the country.

The approved text adds a new criminal offense of fraud to the Penal Code, imposing prison terms of 4 to 8 years and a fine for anyone who organizes, manages, offers or distributes portfolios or intermediates operations involving virtual assets, securities or any financial assets in order to obtain an illicit advantage to the detriment of others, inducing or keeping someone in error, through artifice, trickery, or any other fraudulent means.

Money Laundering
In the Money Laundering Law, the text includes crimes committed through the use of virtual assets among those with an aggravating factor of 1/3 to 2/3 of the penalty of imprisonment from 3 to 10 years, when committed repeatedly.

These companies must also keep a record of transactions so as to submit information to bodies that inspect and combat organized crime and money laundering.

The project establishes as market guidelines principles such as good governance practices and a risk-based approach; information security and personal data protection; and consumer and user protection and defense.

Prevention must also act to combat financing of terrorism and proliferation of weapons of mass destruction, in line with international standards.

Consumer Code
The text determines that, where applicable, the rules of the Consumer Protection Code will apply to operations in the virtual assets market.

Political Exposure
Also in the law on money laundering, the bill adds an article referring to the federal executive branch the regulation and operation of the National Registry of Politically Exposed Persons (CNPEP), accessible through the Transparency Portal.

Politically exposed persons are those who have occupied – over the last five years, in Brazil or in other countries, territories and foreign dependencies – public office jobs or other relevant public functions, as well as their representatives, family members and advisors.

The text determines that all bodies and entities of Brazil's powers, states, Federal District and municipalities must submit, to the register manager, any updated information on those classified as politically exposed persons (PEP).

It will be up to companies in the financial system to consult the CNPEP as a procedure for complying with the obligations of informing the Financial Intelligence Unit (Unidade de Inteligência Financeira, formerly Coaf) about operations suspected of money laundering or related crimes provided for by law.

Rejected points
The plenary rejected the amendments presented by the parties in an attempt to change parts of the text. Check it out:

- A Republicanos party highlight trying to guarantee current providers of these services continuity until the relevant public body makes a decision about authorization;

- a Brazilian Social Democracy Party (Partido da Social Democracia Brasileira/PSDB) highlight trying to include in the text a suggestion by senators for digital asset service providers’ assets to be separated from those belonging to cryptocurrency investors;

- a Socialism and Liberty Party (Partido Socialismo e Liberdade/PSOL) highlight trying to include in the text a section providing a zero federal tax (PIS/Cofins, IPI and Import Tax/PIS/Cofins, IPI e Imposto de Importação) rate referring to the purchase of equipment and software for cryptocurrency “mining”, by December 2029.

Source: Agência Câmara de Notícias.