Hello readers, am up to the next stop of my writing series, ‘The Cryptocurrency Breakthrough 2020 – Synopsis 18’ – Cryptocurrency Regulations in Brazil
Brazil formally called ‘The Federative Republic of Brazil’ is the largest country in South America and Latin America is one of the largest democracies in the world. Brazil is always known to catch up with tech trends, follow the real and stick to it. The Central bank is also very supportive of blockchain innovations.
With a huge market cap and immense popularity within the users, what do you think?
The government’s approach on cryptocurrencies would be friendly, warm or harsh?
Let us find out.
Government’s Approach to Cryptocurrencies
The government tends to learn more about cryptocurrencies and carry out research to know more about their business and study their potential use in money laundering. The government is still hesitant to cryptocurrencies which are believed to be changed in the near future. However, in 2019, the President of the Chamber of Deputies of Brazil ordered a commission to consider cryptocurrency regulations in Brazil.
Another example of a positive blockchain approach by the government was witnessed when the Brazilian Workers Party President Fernando Haddad announced the use of blockchain technology to publish his and government’s plans to process petitions and write laws on Ethereum.
Crypto Regulations in Brazil
Brazilian authorities do not consider the cryptocurrencies as legal tender and have not regulated the cryptocurrencies and the activities. The Brazilian Real is the only legal tender and accepted in Brazil. However, the government has not completely ignored the cryptocurrencies.
The Brazilian central bank, Banco Central Do Brazil issued warnings against the risks involved in cryptocurrencies in 2014 and 2017.
However, The central bank in the same year adopted IMF guidelines on cryptocurrencies and recognized them as ‘Assets’.
On the other hand, the ICO’s are closely watched by the securities and exchange commission, Comissao de Valores Mobiliarios (CVM) to better understand associated benefits and risks. It published a detailed statement on its official website regarding the regulatory framework applied to the ICO’s. According to this, the ICO’s are subjected to prior registration with CVM.
Brazil’s Congressman Aureo Ribeiro presented a bill called PL 2303 to the Brazilian Chamber of Deputies nearly five years ago in 2015. It is considered as the most comprehensive bill with a virtue of regulating cryptocurrencies. Other two bills PL 3825 and PL 3949, both presented in 2019 are still being reviewed by the Senate.
Laws Implemented on Cryptocurrencies
There are no specific laws or regulations applicable to cryptocurrency in Brazil, all exchanges come under the purview of Normative Instruction No. 1888 issued by the Department of Federal Revenue. According to this, all companies that carry out crypto transactions in Brazil must report to them else face fines ranging from 500BRD to 1500BRD ( $120 to $360).
However, Brazil does have an Anti-Money Laundering law applicable to all institutions dealing with money. The companies are required to maintain the data of all the transactions and in case of any suspicious transaction or the transactions that satisfy the criteria set by the Financial Activities Control Council (COAF), need to report them at the earliest. COAF is a Federal government agency which is in charge of enforcing anti-money laundering laws and regulations.
Taxation and Mining
Taxes Applied on Cryptocurrencies
The Brazilian Federal Tax authorities consider cryptocurrencies as ‘Financial Assets’ which come under the tax laws. The profits gained from cryptocurrencies must be declared as ‘other assets’ in the income tax returns. The individuals are subjected to pay Capital Gain Tax varying from 15% to 22% if the monthly gains from the disposition of cryptocurrencies exceed 35,000 BRL.
Mining of Cryptocurrencies
The mining of cryptocurrencies is not restricted in Brazil nor are they treated as concerns by any Brazilian authority which erases the possibility of regulations on them.
Series of Events
06-05-2020:– The Brazilian President Bolsonaro is under investigation by Brazilian prosecutors on the charge of being guilty of violating the Brazilian Constitution. The Brazilian army had developed a blockchain software to track the arms and other weapons to keep them under their control which was shut by the president. But the prosecutors have held him responsible.
24-02-2020:- Brazil’s Central Bank Announced New Instant Payment to combat with the cryptocurrencies which will be rolled out in November.
15-02-2020:- Due to the strict laws on taxes which demanded the companies to maintain every user data and report all the transactions, two exchanges faced a severe downfall in the trading volume and were forced to shut down.
20-01-2020:- The Brazilian CVM announced the launch of a regulatory Sandbox containing specific guidelines for cryptocurrency and digital token issuance.
11-01-2020:- A commercial bank called Banco Bradescohas shunned an agreement which prevented the closure of any cryptocurrency exchange accounts as it believed cryptos could present the risks of money laundering.
10-12-2019:– Brazilian police busted a Bitcoin scam that raised $359 million from the victims and arrested nine people.
01-08-2019:- The Brazilian tax authority requires the cryptocurrency companies to report transactions as set forward in Normative Instruction RFB 1,888/2019. Failing to which could result in fines.
11-07-2019:– Coffee farmers in Brazil can use digital currency to purchase fertilizers and machinery which could help the coffee production.
22-01-2018:- Brazilian security exchange commission CVM determined digital currency Niobium Coin (NBC) as a non-financial asset. It has been classified as utility tokens and therefore not subjected under CVM regulations.
19-11-2015:– Brazil’s House of Representatives held a public hearing to discuss a bill that would
give the country’s central bank oversight of digital currency activities in the country.
07-04-2014:- Brazilian Tax authorities require bitcoin holders to report bitcoin holdings and payment of capital gains tax over a certain value.
19-02-2014:- The Central Bank of Brazil does not recognize the cryptocurrencies as legal tenders or electronic currency under Brazilian Law. It also issued a warning that the currencies are not authorized and not issued by a central authority. The bank also said it was following the evolution of virtual currencies and would consider adopting measures.
Brazil has enormous demand within the country and huge amounts of bitcoins are traded every day. The government has also seemed to be progressive with respect to cryptocurrencies by studying and researching the cryptocurrencies and their activities. However, the government lacks the regulations and specific tax policies on cryptocurrencies. The Bills which intend to regulate cryptocurrencies are pending in the parliament.
Hence it would be good for the cryptocurrency’s future in Brazil if the government will successfully complete all the pending works on regulations.