Brazil Crypto Laws Demand Up to 6 Years Prison for Embezzlement

Brazil lawmakers have approved a crypto bill that includes a new crime of virtual asset embezzlement — topical considering the FTX scandal

article-image

Brazil President Jair Bolsonaro | Source: Shutterstock

share

Brazil lawmakers have formally approved a regulatory framework set to govern the country’s crypto sector.

The bill drew attention earlier this year after a previous version passed through the Senate in April. It had since since been stuck in the Chamber of Deputies, the government’s lower house.

Local media reported that the text, written by federal deputy Aureo Ribeiro, includes a new crime: digital asset embezzlement, which appears targeted at exchange operators.

Penalties include prison time between two to six years along with fines, which can also be handed out to entities which operate in Brazil without a physical presence.

There’s also a rule requiring crypto companies such as exchanges and other intermediaries to hold a virtual service provider license, similar to rules set in place across the US and Europe. 

The country’s efforts to regulate local crypto players comes amid turmoil in the wider digital asset space. Strife was most recently prompted by the collapse of FTX, which has left up to one million users out of pocket including regular investors, crypto projects and hedge funds.

Former FTX CEO Sam Bankman-Fried allegedly siphoned user funds to make risky bets across crypto markets via sister trading unit Alameda Research, leading to a multibillion-dollar black hole in its balance sheet and a crippling liquidity crisis.

Brazil lawmakers however disagreed over whether to demand crypto exchanges ensure client funds are segregated from operational cash. This would hypothetically protect customers from corporate malfeasance and other crippling events such as exchange bankruptcy.

But Ribeiro effectively opposed this proposed change, saying it would stifle the crypto market. Currently on hold, the asset segregation issue will be debated at a later date.

Crypto is big in Brazil

Government-appointed bodies will reportedly decide which digital assets can be listed for trade, and relevant companies will have an 180-day grace period to comply with the incoming rules.

Brazil, which has suffered from high inflation for decades, is one of the most active crypto markets in the world, according to recent Chainalysis data. About 5% of its population actively invests in crypto, and more than 900 Brazil-based companies currently accept crypto as payment. 

One silver lining could be that the domino-style tumbling of unregulated crypto firms over the past year may usher in regulated institutions with stronger compliance frameworks and robust risk systems. At least, that’s what Brazil’s incoming crypto regulations could inspire.

Brazil’s bill is already approved, but it will now head for a signature from outgoing president Jair Bolsonaro before his term ends on Dec. 31. Luiz Inácio Lula da Silva is expected to take up office on Jan. 1.

Some lawmakers reportedly preferred the bill be approved during Bolsonaro’s term, over fears Silva may not be as enthusiastic about cryptocurrency.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million