Brazilian President Jair Bolsonaro on Thursday morning signed a bill into law that establishes a complete regulatory framework for the trading and use of bitcoin in the country, according to the federal government’s official journal (DOU).
President Bolsonaro enacted the bill approved by Congress without any modifications. As previously reported, the new rules recognize bitcoin as a digital representation of value that can be used as a means of payment and as an investment asset in the South American nation.
A virtual asset is “a digital representation of value that can be negotiated or transferred electronically and used for payments or as an investment,” per the bill’s text.
The new law, which goes into effect 180 days after today’s signature, does not make bitcoin or any cryptocurrency a legal tender in the country. Notwithstanding, the legitimacy conferred upon BTC’s use case as payment is meaningful, and has the potential to spur greater activity in the country. The extent to which that happens, however, is dependent on the actions of the regulator in charge.
The executive branch will select the government bodies that will oversee the market. The expectation is 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), helped lawmakers craft the overhaul legislation.
If the BCB gets confirmed as the sector’s watchdog, the outlook isn’t the best. While the regulator can’t override the aforementioned 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 push greater adoption of bitcoin as payment. Its President Roberto Campos Neto has said multiple times that he doesn’t see cryptocurrencies as a great alternative to fiat payments, citing mainly volatility. More importantly, the BCB is working to release its own digital currency, the Real Digital, which is currently planned to go live by 2024.
But the greater regulatory clarity given by the legislation encourages businesses to explore the burgeoning payment method more closely. This, in turn, can translate into more widespread adoption of bitcoin as a medium of exchange in Brazil, irrespective of whether an active endorsement by the BCB comes or not.
Read a detailed breakdown of the legislation here.