Regulatory framework for cryptocurrencies: which way to pass the law

Charlie Taylor

Brazil is in the process of approving a regulatory framework for cryptocurrencies. It remains to be seen which final text will arrive at President Jair Bolsonaro’s desk. The race has two competitors: PL 3,825/2019, by senator Irajá (PSD-RJ) and PL 2,303/2015, authored by federal deputy Áureo Ribeiro (Solidariedade-RJ). In December of last year, the Senate’s Committee on Economic Affairs (CAE) predicted that it would be able to pass the bill in a final manner that month. In practice, this would mean that the text could go to the Chamber of Deputies without having to go through the Senate Plenary, in an act called in Brasilia “procedural economy”. But the commission was unable to vote that month and the Chamber was quicker, having approved Áureo Ribeiro’s PL in its plenary. The bill is now on the Senate’s Board of Directors. On Tuesday (22), CAE approved Senator Irajá’s project. And a certain impasse appears: the PL could go straight to the Chamber, as expected; but with Deputy Áureo’s text already approved, the Senate must decide whether to combine the two (apendar, in congressional jargon), vote and send it to the president or send the proposal to the Chamber. The first option would be the fastest, but it only works if Senator Irajá accepts that the differences in his text are eliminated and that the full text of Deputy Áureo prevails. If this happens, the Senate just has to vote in the Plenary the appendix (which would actually be the deputy’s text) and deliver it to the Executive Branch. But, if Senator Irajá wants any point different from his text to remain, the appendix will then be voted on by the Senate Plenary and then return to the Chamber of Deputies to be evaluated by the totality of the 513 federal deputies. The general assessment is that Senator Irajá is very engaged with the subject and would hardly accept that any of his marks remained in the final text. “The two texts are very similar, but there are some innovations in Senator Irajá’s text that I believe he will try to include in this mix. This would force him to return to the Chamber”, says Julien Machado Dutra, head of government relations at Grupo 2TM. But regardless of a possible impasse, Dutra believes that “the very strong tendency is for the project to be approved and sanctioned in this first semester”. Rodrigo Monteiro, executive director of ABCripto, analyzed the text approved by the CAE. “We are happy with the progress in the Senate (CAE) of the process of discussion and voting on the Regulatory Framework for Cryptoeconomics, which is as important for the health of the market as it is for the protection of citizens and institutions”

Bolsonaro’s Presence

The presence and favorable vote of Senator Flávio Bolsonaro in the CAE is a very strong indication that the president should sanction without further questions. Therefore, there is an expectation that the vote will go ahead and the project will advance before a possible change in the Executive Branch with the 2022 elections.

The differences in the texts

Despite being largely similar to the House Bill, Senator Irajá’s text has significant particularities: It makes investors’ equity segregation a principle (if the company enters bankruptcy or judicial reorganization, the clients’ money would be separated from the of the company and would not be used to pay off tax, labor and supplier debts). Promotes tax exemption for cryptocurrency mining done with clean energy. Creates the registry of politically exposed people.

BC as a regulatory body

The PLs establish that it will be up to the Executive Branch to regulate the cryptocurrency sector. Everyone assumes that the Central Bank will be chosen, which is already very active on the subject. A Folha report on Sunday (20) stated that the Central Bank is considering proposing new guidelines to establish an inspection of cryptocurrency transactions in Brazil, according to a conversation with bankers with the president of the institution Roberto Campos Neto. According to the newspaper, the topic of Neto’s conversation with presidents of several important banks that operate in the country was about containing the explosion of scams and fraud in Brazil involving cryptocurrencies such as bitcoin. The idea, the bankers reported on condition of anonymity, is to frame cryptocurrencies as an investment vehicle. Monteiro, an executive at ABCripto, states that the ideal would be for bills to already define the BC as responsible: “The approved text excluded some pre-established thematic competences – such as the role of the CVM –, but it did not evolve to the definition of an agent specific regulator, leaving the decision to the discretion of the Executive Branch. Preserving the specific powers (CVM, Susep, ANPD, CADE, etc.), we believe that prior legislative attribution, with the definition of the Central Bank as the primary regulator, would be more effective and adequate. We continue to work towards this objective and we hope to contemplate it during the process”.

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