Chamber should loosen rules for cryptocurrencies in setback to BC

To pass the bill that imposes rules on the crypto-assets market, the Central Bank gave up a provision in the proposal that shielded investors’ assets.

The so-called asset segregation was one of the points defended by the president of the BC, Roberto Campos Netto, to match the rules of this new market with those of the financial system and thus bar the use of cryptos in money laundering and fraud — mainly through currencies such as the bitcoin and ethereum.

Today, most crypto exchanges mix investor money with company money. In cases of bankruptcy or any irregularity, it becomes more difficult to recover the customer’s money.

This is what happened this week when, by a court decision, Capitual had BRL 480 million blocked due to a dispute with its former partner, the giant Binance.

The money belonged to Binance customers, who had hired Capitual to do currency conversion (cryptocurrencies and conventional currencies).

According to reports, with the blockade, Binance had to reimburse the amounts with its own resources, pending the return by Capitual.

The BC wanted to separate investment resources from brokerages’ cash, but the measure faces resistance in the Chamber.​

According to people participating in the discussions, the project’s rapporteur, deputy Expedito Netto (PSD-RO), told the BC that he preferred to leave the text more “open”, leaving the “more technical” details to the regulation of the project. Asset segregation would be one of those points.

The previous text, approved by the Senate, provided for segregation, but did not impose this asset separation for the entire market.

The final opinion of the Chamber, which can be voted on this week, excludes segregation on the grounds that it would be a difficult process to implement due to the costs involved – which would leave the market concentrated in large companies.

However, the market —although diversified in number of brokers— is already highly concentrated. More than 52% of the monthly volume of buying and selling cryptocurrencies is handled by Binance, the global leader.

Another incongruity: companies that have a smaller market share are also not opposed to segregation. They believe that, with the rule, brokerages that currently operate in the “dark”, covering up clients with risk of money laundering or fraud, would have to fit in.

Even so, BC representatives before Congress assessed that there was a risk that the project would not be voted on if there was a restriction.

The agreement reached was to throw the matter to the regulation of the law. After the bill is approved, President Jair Bolsonaro must issue a decree transferring the regulatory power of the law to the Central Bank. The regulatory body would thus define segregation as a measure for the market.

In the opinion of some cryptocurrency companies, the rule under discussion treats digital assets as a financial resource, which would be incorrect, since in the trading platform, the asset does not stay in the brokerage. The company only serves as a platform for buying and selling. The securities (protected codes) stay with the traders. However, other companies, such as the Brazilian Mercado Bitcoin, have positioned themselves in favor of the clause.

Binance, on the other hand, asked for changes to the rule, considered too broad. Although it also considers that digital assets do not need to be segregated, as they are not in the company’s cash, the giant did not oppose the text, according to reports from lawmakers.

In the opinion negotiations, the rapporteur also decided to release companies from reporting all types of transactions above R$ 10 thousand to Coaf (Council for Control of Financial Activities). The requirement is included in the text approved by the Senate so that this sector operates with the same rules as the traditional financial market.

In this case, companies would continue with the obligation defined by the Federal Revenue Service to inform only operations above R$ 35 thousand.

This is another rule that the BC decided to modify via regulation.

There are risks, however, in the BC’s strategy of playing the two themes for regulation. If President Jair Bolsonaro (PL) succumbs to pressure from companies that want looser regulation, regulation could be delegated to a body other than the BC.

In his report, the deputy also accepted the request of giants in the sector that, once approved, the new law will only come into force after six months. The version approved by the Senate provided for immediate application.

Smaller companies say that deadline will give companies even more time, some involved in police investigations, to continue operating without rules.

Together, the resources moved in the country by crypto exchanges already represent about BRL 300 billion, according to BC data from December last year.

To get an idea of ​​the size of these operations, the variable income trades carried out at B3 (shares, funds, BDRs and ETFs) totaled around R$ 600 billion in the same period, according to data from Anbima (Brazilian Association of Financial Markets Entities). and Capital) gathered by the BC.

The amount moved by digital applications already represents 27% of the resources currently deposited in the savings account. Last year, Binance alone moved BRL 40 billion in Brazil.

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 Revenue of foreign exchange evasion and money laundering.

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

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.

Through its advisory, the BC said it would not comment on negotiations on the bill. Deputy Expedito Netto did not respond to the report’s questions until the publication of this text.