Understand the project that regulates cryptocurrency operations

The Senate’s CAE (Commission on Economic Affairs) unanimously approved this Tuesday (22) a proposal that regulates financial operations with cryptocurrencies in Brazil.

The text, which has been called the “regulatory framework for cryptocurrencies”, defines guidelines for the performance of digital asset service providers and provides mechanisms to curb or restrict illegal practices, such as money laundering and foreign exchange evasion, and for punishments. in case of fraud and scams.

If there is no appeal by senators for a vote in plenary, the bill goes straight to the Chamber of Deputies.

See details of the project that regulates cryptocurrencies in Brazil

What are cryptocurrencies?

They are digital assets that use encryption systems to carry out transactions. Unlike government-issued money, such as the real or the dollar, cryptocurrencies are launched by private agents and traded exclusively on the internet. The holder of a virtual currency can only redeem it using a code provided by the seller.

Who are the virtual asset service providers?

The company that performs, on behalf of third parties, at least one of the services:

• redemption of cryptocurrencies (exchange for sovereign currency);

• exchange between one or more cryptocurrencies;

• transfer of virtual assets;

• custody or administration of these assets or instruments for controlling virtual assets;

• participation in financial services related to the offering by an issuer or the sale of virtual assets.

The text proposes that companies be considered financial institutions and subject to all the rules of the financial crimes law (Law 7,492, of 1986); and also to the Consumer Defense Code (Law 8078, of 1990).

What are the guidelines to be followed by service providers?

• promote free competition and free enterprise;

• control and maintain the separation of resources contributed by customers;

• define good governance and risk management practices;

• ensure information security and protection of personal data;

• protect and defend consumers and users and popular savings;

• ensure the soundness and efficiency of operations.

What are the penalties provided for in case of fraud?

The project inserts in the Penal Code (Decree-Law 2848, of 1940) a specific crime for irregularities involving cryptocurrencies.

Fraud in the provision of virtual asset services is defined as “organizing, managing, offering portfolios or intermediating operations involving virtual assets, in order to obtain an unlawful advantage, to the detriment of others, inducing or keeping someone in error, through artifice, ruse, or any other fraudulent means”.

The penalty for these cases is imprisonment from four to eight years, in addition to a fine.

How does the proposal deter money laundering?

The Executive Branch must create rules in line with international standards to prevent money laundering and the concealment of assets, as well as combat the activities of criminal organizations, the financing of terrorism and the production and trade of weapons of mass destruction.

The bill submits virtual asset service providers to the rules of the money laundering law (Law 9,613, of 1998).

They are required to record all transactions that exceed the limits set by Coaf (Council for Control of Financial Activities).

If the operation exceeds this limit, brokers will have to notify Coaf within 24 hours, as required by law.

What changes for brokers?

It is up to the bodies appointed by the Executive Branch to authorize the operation of cryptocurrency service providers in Brazil and to establish rules for the cancellation of the license in case of disobedience to the legislation.

The provision of virtual asset services without prior authorization will be framed in the law that typifies the crime against the financial system (Law 7,492, of 1986).

Authors who operate without authorization or present false documents may face imprisonment from one to four years, in addition to a fine.

It is up to the Central Bank to grant authorization to institutions that “may exclusively provide the service of virtual assets, or combine it with other activities”. This regulation must be carried out by a body indicated in an act of the federal government.