‎Blockchain and Cryptocurrency Law in Brazil

The Law of cryptocurrencies in Brazil

Cryptocurrencies, as can be seen from the nomenclature, are coins like any others we use daily, differing in that they are digital. They use cryptography and block chain technology, the base system for crypto actives, to guarantee the security of transactions.

Our cryptocurrency lawyer in Rio de Janeiro, São Paulo and Brazil clarify that, in May 2019, the Brazilian Internal Revenue Service published Normative Instruction No. 1.888, bringing with it a legal definition of crypto actives, or crypto currencies, through item I of art. 5: "crypto active: the digital representation of value denominated in its own unit of account, the price of which can be expressed in local or foreign sovereign currency, transacted electronically using encryption and distributed recording technologies, which can be used as a form of investment, instrument of transfer of values ​​or access to services, and which does not constitute legal tender."

In addition to the well-known Bitcoin, our cryptocurrencies Lawyers in Rio de Janeiro, São Paulo and Brazil report that there are several other cryptocurrencies on the market today (eg: ethereum, ripple, dogecoin, tether, Bitcoin cash, among others) and this number shows become higher and higher over time. The law that determines the price of crypto currencies is the law of supply and demand, that is, the greater the search for a particular crypto currency, the greater its value.

Furthermore, it should be noted that the crypto currency has a great ability to fluctuate, given that they do not have a fixed base of value as happens with other currencies, often causing insecurity in investors who seek stability in their financial assets, informs our lawyer specializing in cryptocurrency in Rio de Janeiro, São Paulo and Brazil.

On the other hand, cryptocurrencies are part of a new reality of forms of business, and, therefore, deserving a closer look in Brazilian Law.

Pursuant to article 21, item VI and article 164 of the Federal Constitutions of Brazil, the issuance of currency is the responsibility of the Union, and must be carried out exclusively by the Central Bank.

According to Article 6, Vi of Law No. 12,865/13, electronic coins are "resources stored in an electronic device or system that allow the end user to carry out a payment transaction." In this sense, it is worth highlighting the difference between electronic currency and virtual currency (crypto currency). Pursuant to item 5 of Communiqué No. 31,379/17 of the Central Bank of November 16, 2017, electronic money "(...) is a way of expressing credits denominated in reais. In turn, the so-called virtual currencies are not referenced in reais or in other currencies established by sovereign governments."

The Brazilian legal system, physical or electronic coins are provided for by law and must be duly issued by an authority. Crypto currencies on the other hand, come from technological systems and are not regulated by the Central Bank.

Our Cryptocurrency lawyers in Rio de Janeiro, São Paulo and Brazil understand that the world of cryptocurrencies today in Brazil has grown a lot as an investment vehicle, even impacting import numbers. However, remembering that currency has the function of a means of payment, but it has grown much less in this aspect. The consequence of this for BC is that we will first regulate as an investment and then as a form of payment."

It should be clarified that, with the proper regulation by the competent body, the Law of cryptocurrencies will be accepted by the Brazilian legal system, bringing greater legal security to the market itself and its users, as well as the implementation of laundering prevention measures of money, financing illegal practices and defining a tax rule for users of cryptocurrencies.

With the likely regulation of cryptocurrencies, there will be an increasing need in the market for legal professionals directed to this new area of ​​activity, which, currently, are in a reduced number.

Therefore, our cryptocurrency Lawyers in Rio de Janeiro, São Paulo and Brazil can help the investor to solve the legal problems of crypto currencies, such as the taxation of cryptocurrencies, inheritance in the form of cryptocurrencies, among others.

Adhesion to the crypto currency market has grown rapidly in recent years, with Bitcoin being the great symbol of this spread. Companies known as exchanges contributed this expansion.

Exchange means exchanging, which already gives a good idea of ​​what activity these companies perform. In short, they are cryptocurrency brokers.

 The crypto world is open and decentralized, so trading is decentralized too. The exchange is here if the environment in which the negotiation takes place.

What rules do exchanges need to follow?

Although specific regulations for cryptocurrencies and exchanges already exist in some countries, this is not the reality in Brazil.

RFB Normative Instruction No. 1.888, established in 2019 by the agency, defines what crypto actives are, what an exchange is and the requirement that they produce a monthly report with all the business performed.

According to Gomes, the norm not only creates obligations for exchanges, but also for all market players, since those who carry out transactions with cryptocurrencies through an exchange will not need to report to the Revenue, as the process is under the company's responsibility.

CVM is responsible for regulating any type of security, but today crypto currencies do not fall into this category. “Crypto active assets are not considered financial assets like shares, so the CVM only regulates the offer and sale of these assets. It cannot control how the marketing is done, as in the traditional market.

CVM can even question exchanges if there are irregular movements, such as pyramids or money laundering, but it has to use current legislation as criteria, and not something specific for cryptocurrencies.

Another important legal step for exchanges took place in 2020, when the IBGE made available a national code of economic activity specific to the crypto actives market, classified as a brokerage and custody service for crypto actives.

The code resolved a concern, when analyzing a contract, to identify the company's corporate purpose, what it actually does.

Are there chances of exchanges being regulated?

The market for crypto actives is based on offering without state interference, so having a control in this sense would totally evade the idea of ​​the crypto active.

Exchanges set rules

In the Bitcoin Market, for example, there are rules to prevent money laundering, in addition to the registration of users.

The code compels exchanges to preserve customer data and comply with anti-money laundering obligations, such as limits on transaction values.