Arbitrary law that hits the cryptocurrency market in a Senate vote, understand the proposals

Charlie Taylor

This afternoon, proposed amendments to the PL 3825/2019, which affects the cryptocurrency market and some of them are quite dangerous, as they are arbitrary laws that give a lot of freedom of interpretation to inspectors and regulators. All documentation can be found on the Senate website.

Bill No. 3825, of 2019

Bill number 3825 was voted on and approved in 2019, after an initial proposal by Senator Flávio Arns (REDE/PR). On December 22, 2022, Senator Irajá (PSD/TO) presented Amendment 2 to PL 3825/2019, which brought several changes to the original text, updating several relevant points of the law. The modification was authorized by parliamentarians and has been in effect since then.

Know more: Learn about the proposed regulation of cryptocurrencies in Brazil and understand the tax exemption on mining machines any service provider virtual assetsrather than just cryptocurrencies and exchanges.

Art. 1 (…) the provision of virtual asset services”.

Screenshot of article 1 of PL 3825/2019

Some of the new amendments that will be voted on are very arbitrary

I reviewed all the proposed amendments to understand what they change, how it affects the market and what the justification is presented by the author of the legislative project. I will summarize a few of the most relevant ones, so that you – Cointimes reader – know what to look for when reading about what has and has not been approved by our late senators. There are some that are just conceptual corrections, small legal details and others that are even positive, as, for example, is the case of amendment in number 5, which would legally allow the use of digital assets as a credit or debit tool for private companies and public entities, such as municipalities adopting NFTs. At amendments 7 and 13 they are also important, as they bring more clarity about what is considered the property of service providers and what is the user’s property. Protecting this user’s money against possible freezing or confiscation that can be applied as punishment for companies that violate some laws, but that keep third party funds in escrow. On the other hand, there are some very dangerous amendments, which bring enormous freedom of interpretation and arbitrariness that is normally used for authoritarian or even corrupt practices, against the free market and against private property. This is the case of splice numbers 4, 6, 8, 9, 10 and 11. Each of these splices has negative charges, such as:

Amendment 4 – Establishes a proactive attitude of the inspector to encourage competition and transparency of exchange services. This gives authorization for them to apply their own and arbitrary judgment on attitudes that they consider to be against free competition, transparency and financial commitment of companies.

Amendment 6 – Maintains the CVM’s absolute authority over the sector, ignoring all the rest of the law that requires special care with assets.

Amendment 8 – Limits the operation only to exchanges that obtain prior authorization to operate from the regulatory body. Blocking the operations of any company that does not have this prior authorization, and can be used as a letter of exchange and lobbying, making competition difficult.

Amendment 9 – Changes the text that defines what an exchange is, including details of other related services, following European Union legislation as a reference. Amendment 10 – It changes the text defining what a digital asset is, but adds a paragraph that gives the regulator/fiscal freedom to interpret what is or is not a digital asset, creating legal arbitrariness and the possibility of corruption.

Amendment 11 – Changes the text of another law, in which it adds new companies that are affected by the law, making it more comprehensive to any company that has any economic activity related to cryptoassets. It can even affect companies from other sectors that adopt crypto assets in payments. It is important to note that the amendments can be changed in a plenary session and some interpretations about their possible effects are the opinion of the writer of this article (Vini Barbosa). The session can be watched on TV Senado.

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