Cryptocurrency brokers are already trading ‘half-exchange’ and BC speeds up market regulation

The BC (Central Bank) prepares the rules that must equate national and foreign digital asset brokers and exchanges with investment banks.

The new rules will try to stop the use of cryptocurrencies in money laundering and the evasion of foreign exchange to protect the country’s level of savings – already considered too low by the BC.

This movement occurs at a time when crypto asset companies, mainly digital currencies, such as Bitcoin and Etherium, trade in the country the equivalent of half the values ​​​​of B3, the Brazilian stock exchange – about R$ 300 billion, according to BC data. December of last year.

During this period, variable income operations carried out at B3 (shares, funds, BDRs and ETFs) totaled around R$ 600 billion, according to data from Anbima (Brazilian Association of Financial and Capital Market Entities) gathered by the BC.

The amount moved by digital applications already represents 27% of the resources currently deposited in the savings account.

The exponential growth of this market in the last three years, without any type of regulation and control, raised the fear of the BC and the Federal Revenue for foreign exchange evasion and money laundering.

In July 2021, for example, the PF launched the Daemon operation, which targeted Cláudio José de Oliveira. He would have diverted R$ 1.5 billion from 7,000 customers, according to data from the Coaf (Council for the Control of Financial Activities) and the Federal Police.

A month later, the Kryptos operation advanced on the financial pyramid fraud scheme led by businessman Glaidson Acácio dos Santos, known as the “bitcoin pharaoh” and which has accumulated more than 67,000 customers in almost five years of operation.

For BC and Ministry of Economy technicians involved in the discussions, applications in currencies or other digital assets could also serve to finance trafficking or terrorists, if there were no regulation.

Today, a dozen countries have tightened their grip on this market, forcing operators to play according to the rules of other financial institutions.

Faced with this situation, the BC decided to work together with the Chamber of Deputies and the Federal Senate to approve a legal framework for this market segment.

The project was approved by the Senate and is now in the final phase of urgent voting in the Chamber as one of the government’s priorities. It is expected to be voted on by the end of June.

As the guidelines of the law must remain unchanged in the current phase of discussion in the Chamber, the BC has started to listen to companies, such as foreign giants Binance, Coinbase, Bitso, and the Brazilian Mercado Bitcoin.

These companies have conversations with the BC board of directors and the mayor, Roberto Campos Netto, who, according to reports, is very interested in knowing the dynamics of this segment that operates within a world called Blockchain — a kind of financial internet that runs within the internet that we know and which intends to support safe financial operations and outside the conventional banking environment.

Companies were concerned that the bill would be so rigid that it would strangle the future of this business.

With the guidelines already approved by the Chamber, companies seek certainty that they will have an open path to be able to promote innovations such as, for example, the sale of shares, debentures and other securities.

Although the bill in progress provides for this possibility, it will be up to the CVM (Brazilian Securities and Exchange Commission) to have the final word on the matter.

Without regulation, some of these companies, such as Binance, even sold debentures in Brazil and were suspended because this practice is only allowed for financial institutions based in the country, which have registration and data authorization by the CVM.

For now, according to reports, the big crypto companies want the regulator to tighten the rules, demanding compliance (governance rules to prevent fraud or crimes) and minimum capital requirement, so that this market is controlled by the giants, separating “the wheat chaff”.

Many companies, including the giants, were involved in fraudulent schemes in the country that led investors to suffer huge losses.

In the conversations, the BC signaled that it will oblige digital brokers to “get to know better” their customers. Politically exposed persons will have rules similar to those of banks and a national registry of politically exposed persons with access to financial institutions in general will be created, such as the Cadastro Positivo.

Crypto-companies will have to report any transaction in excess of BRL 10,000 to Coaf.

Currently, by virtue of a specific instruction for transactions with crypto-assets, the Federal Revenue requires that transactions above R$35 thousand be notified. According to this rule, the tax authorities recorded BRL 200 billion in the purchase and sale of cryptocurrencies last year.

Another standard evaluated by the BC for this segment will be the total separation between the resources invested by the client with the capital of the digital brokerage. If the brokerage goes bankrupt, there will be no mixing of funds, a rule that is already in force for investment banks.

Furthermore, the crypto company will not be able to use its equity capital on a single expansion project.
It will be up to the BC to determine risk dilution with the company’s equity to avoid bankruptcy, in the same way as with financial institutions.

The law, if approved without further changes, requires the creation of a specific regulatory agency to deal with this market, but, apparently, this task will fall to the BC itself.

The municipality may open administrative proceedings whenever there are infractions detected. It can also demand information whenever it notices a suspicious transaction, in the same way that it happens today with banks.

If any investigated case involves fraud, it will be sent to the Federal Police who, at the end of their work, may indict those involved.

The bill also provides for the inclusion of a new crime in the Penal Code – money laundering through crypto-assets.

Sources: BC, Anbima, Federal Revenue, companies