Bitcoin is far from becoming legal tender in Brazil: Interpretation of the bill

In the past few weeks, a special committee of the Brazilian Chamber of Deputies approved a Bitcoin bill, leading many in the crypto community to believe that the country will follow El Salvador’s lead and make Bitcoin legal tender.
But that is not the case. Not only does the bill not mention Bitcoin as legal tender, but Roberto Campos Neto, the president of the Central Bank of Brazil, has repeatedly stated that making Bitcoin legal tender in the country is not on his agenda.
The bill (PL 2303/15) was approved by a special committee of the House of Representatives on September 29 and is now sent to the plenary for consideration, followed by the Senate, where the final step will be consideration by the Office of the President.
Contrary to rumors, the bill does not seek to make Bitcoin legal tender in Brazil. Instead, it seeks to strengthen investor protection by imposing stricter regulations on companies involved in “crypto assets” and by regulating service providers that provide trading and custody of crypto assets.

The bill defines "crypto assets" as property - any digital representation of value that can be transferred electronically and used as an investment or payment method. This definition may cause confusion and misinformation, but using something as a payment method does not make it legal tender.
For example, Brazilians can use airline miles to buy flights, daily consumer goods and hotel stays, but they are not legal tender. Local and foreign currencies, electronic money, airline miles, and "digital representations" of legal assets such as real estate and financial assets are not considered virtual assets.
The bill defines a “crypto-asset service provider” as any company that performs at least one “crypto-asset service.” Crypto-asset services are the exchange of fiat currency, the exchange of crypto assets, the transfer of crypto assets, custody of crypto assets, and the provision of financial services and services related to the offer or sale of crypto assets by issuers.
Companies must comply with rules on financial transactions, customer identification and record keeping. Institutions authorized to operate by the Central Bank of Brazil can exclusively provide crypto-asset services, or accumulate crypto-assets through other activities, in the form of an agency or entity of the Federal Public Administration.
Companies interested in the “crypto-asset” sector can only operate in the country after registering and obtaining a license, which may require an entity authorization from the Brazilian Federal Public Administration. The government will decide which public administration entity or entities will regulate the industry and its companies, as well as which crypto-assets will be regulated.
Under the bill, providers of crypto-asset services must adhere to the following guidelines:
- free enterprise and free competition; - good governance practices and a risk-based approach; - information security and personal data protection; - protection and defence of consumers and users; - protection of public savings; - operational stability and efficiency; - prevention of money laundering, terrorist financing and financing of the proliferation of weapons of mass destruction, in line with international practices.

The Bitcoin bill will focus specifically on money laundering with crypto assets. The bill will increase penalties for criminals who launder money using crypto assets from 33% to 66%, meaning those found to have laundered money through cryptocurrencies will have to hand over ⅔ of their funds, rather than just ⅓ as in previous laws. The bill also extends the prison sentences that criminals may face. Under current Brazilian law, the crime of money laundering carries a prison sentence of three to ten years, along with a fine. The bill's updated rules raise the minimum term to four years and the maximum to 116 years and eight months.

The typical characteristics of the crime of fraud in providing crypto asset services are organizing, managing, providing portfolios or intermediary transactions involving crypto assets to obtain illegal benefits, damage the interests of others, induce or make someone make mistakes, through illegal means, tricks or any other fraudulent means. The penalty is four to eight years' imprisonment and a fine. If a virtual asset service provider operates without authorization, it will constitute a financial crime and be sentenced to one to four years' imprisonment and a fine.

What do the bill writers think?
"In my state, more than 300,000 people have been harmed by financial pyramids made with cryptocurrencies," said Aureo Riberio, the deputy who authored PL 2303/15, in a statement (referring to Cabo Frio, Brazil's largest crypto Ponzi scheme to date, which promised up to 15% returns on investments). He added that the bill aims to ensure that Brazil becomes a market that crypto investors want to focus on, and that criminals are not allowed to act with impunity. "The Brazilian market will move forward and adjust. No more profiteers using technology to defraud millions of Brazilians".
His deputy added that he hopes the bill will help generate revenue for the government through asset seizures and that “it’s a bill that other countries can learn from.”

The country is leaning more towards CBDC
The Central Bank of Brazil is moving quickly to create the Brazilian Central Bank Digital Currency (CBDC), a digital version of the country’s national currency, the Real (hereinafter referred to as the “Digital Real”). In May, the central bank issued ten guidelines for the development of the Digital Real.
Campos Neto, president of the Central Bank of Brazil, intends to launch Brazil's CBDC in the next few years. He plans to hold seven webinars on "Digital Real" between July and November. The goal is to discuss with Brazilian society the ten directives issued in May, study use cases that may benefit from Digital Real, and the technologies most suitable for its implementation.
Four webinars in the past few months discussed the use cases of Digital Real, data security details and confidentiality, offline operations, smart contracts and the Internet of Things (IoT). The fifth webinar will be held on October 20, Beijing time, to discuss the issuance, distribution, custody and destruction strategies of Digital Real. It is reported that the last two webinars will discuss international integration requirements and technologies for issuance and interoperability with existing systems.
Campos Neto has been outspoken about both the digital real and Bitcoin, but has shown more interest in developing Brazil’s CBDC than in adopting Bitcoin as legal tender. He explained that the digital real would depend on instant payments, an open system, and convertible currencies.
The path to making the Digital Real a reality is currently awaiting a vote in the Senate. But currently, Bill 5.387/19 is one of the government’s priorities and aims to simplify and modernize the Brazilian foreign exchange market, Brazilian overseas capital, Brazilian foreign capital, and reporting to the Central Bank of Brazil.

In summary: Bitcoin is far from becoming legal tender in Brazil In short, it is clear that Brazil is not going to make Bitcoin legal tender anytime soon, based on the Bitcoin and Crypto Assets bills currently in various stages of approval by the Brazilian government, the actions of the Central Bank of Brazil, and the comments of Campos Neto. It is not even in the plans of the Central Bank of Brazil or the government.
Brazil is increasing regulatory scrutiny of companies in the "virtual asset" space to "strengthen investor protection." Improving the ability to pay for goods or services with Bitcoin and cryptocurrencies is similar to airline miles and other loyalty programs, but it will not make Bitcoin or any other crypto assets legal tender in the country. (Bai Ze Research Institute)