Federal Senate approves the final text of the Legal Framework for Cryptoassets
On November 29, 2022, the Plenary of the Federal Senate approved the final text of the Bill of Law (in Portuguese: Projeto de Lei – “PL”) No. 4,401/2021 (former PL No. 2,303/2015) in which the Deputy Expedito Netto (Brazilian Democratic Party-Rondônia) is the rapporteur. Currently, PL No. 4.401/2021 is in the processing final stage, which consists on the Brazilian President sanction.
In summary, PL No. 4,401/2021 aims at the regulation of service providers of the “virtual assets” market (which includes the denominated “cryptoassets”), as well as adapting the wording of the Brazilian Penal Code (Law-Decree No. 2,848/1940), the Brazilian Law on Crimes against the National Financial System (Law No. 7,492/1986) and the Brazilian Law on Crimes of Money Laundering or Concealment of Assets, Rights and Values (Law No. 9,613/1998).
PL No. 4,401/2021 provides for the guidelines to be observed in the provision of services in the denominated “virtual assets” market, as well as in the edition of rules by the appointed competent regulatory body(ies).
In summary, “virtual assets” are the digital representations of value that may be (i) electronically traded or transferred, and (ii) used as payment instruments or for investment purposes – excluding securities (eg. shares and debentures) and other regulated financial assets (eg. bonds issued by the Brazilian Federal Government), local currency (ie. Reais), foreign currencies, electronic money (ie. the electronic representation of the national currency or foreign currencies) and points/rewards from benefit programs.
Virtual asset service providers are defined as the legal entities that carry out, on behalf of third parties, the exchange of virtual assets for national or foreign currency, the exchange between virtual assets, the transfer of virtual assets, the custody or management of virtual assets or instruments that enable control over virtual assets, and/or participation in financial services and provision of services related to the offer or sale of virtual assets by issuers.
Within the scope of service provision, Bill of Law No. 4,404/2021 establishes the observance of good governance practices, risk-based approach, information security and protection of personal data, protection and defense of consumers and users, protection of savings and prevention of money laundering and terrorist financing.
The appointment of the competent Federal Public Administration body(ies) to regulate the operation and to supervise the activities of the virtual asset service providers will be made by the Brazilian Executive Authority.
Such body(ies) will be mainly responsible for: (i) authorizing the operation, transfer of control, merger, spin-off and incorporation of virtual asset service providers; and (ii) stablishing the cases in which the activities and operations carried out by the virtual asset service providers will be included in the Brazilian foreign exchange market context or submitted to the regulation of Brazilian capitals abroad and foreign capital in Brazil. Also, such body(ies) of the Federal Public Administration will have to establish the conditions and deadlines (not less than six months) for the adaptation of virtual asset service providers already in activity to the new normative and regulatory provisions.
In the context of criminal legislation, PL No. 4.404/2021 provides for changes in Article 171-A of the Brazilian Penal Code, in Article 1, sole paragraph, II and III, of the Brazilian Law on Crimes against the National Financial System and in Article 1, §4, Article 9, sole paragraph, XIX, and Article 10, II, of the Brazilian Law on Crimes of Money Laundering or Concealment of Assets, Rights and Values, in order to include virtual asset service providers in the list of institutions subject to their provisions.
Our regulatory, banking and capital market teams are available to provide further clarification on the subject.