Brazilian President Jair Bolsonaro on Thursday morning signed a bill into law establishing a comprehensive regulatory framework for trading and using bitcoin in the country, according to the federal government’s official journal (DOU).
President Bolsonaro created a bill that was approved by Congress without modification. 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 country.
Virtual assets are “digital representations of value that can be negotiated or transferred electronically and used for payment or investment,” according to the bill’s text.
The new law, which goes into effect 180 days after today’s signature, does not make bitcoin or digital currency legal tender in the country. However, the legitimacy given to the BTC use case as a payment is useful, and has the potential to spur greater activity in the country. However, the extent to which this happens, depends on the actions of the responsible regulator.
The executive branch will appoint the government body that will oversee the market. The expectation is that the Central Bank of Brazil (BCB) will be in charge when bitcoin is used as a payment, while the state securities and exchange commission (CVM) will be the supervisor when it is used as an investment asset. The BCB and the CVM, together with the federal tax authority (RFB), help the parliamentarians to draft reform laws.
If BCB is confirmed as the watchdog of the sector, the outlook is not the best. While regulators are unable to address the definition of virtual assets set by law, there is no reason to believe that BCB will go out of its way to encourage greater adoption of bitcoin as payment. President Roberto Campos Neto has said several times that he does not see cryptocurrencies as a good alternative to fiat payments, especially the volatility. More importantly, BCB is working on its own digital currency, Real Digital, which is currently planned to go live in 2024.
But the greater regulatory clarity provided by the legislation encourages businesses to explore emerging payment methods more closely. This, in turn, could translate into a more widespread adoption of bitcoin as a medium of exchange in Brazil, regardless of whether an active endorsement by the BCB comes or not.
Read detailed information about the law here.