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It has been widely reported that Brazil was following El Salvador by making Bitcoin a legal tender. However, VIXIO sources say this is far from the truth.
Earlier this month, Livecoins broke the news that Brazil was going to allow consumers to make purchases for various goods and services using Bitcoin. The story quickly spread throughout the online media as “Brazil could adopt Bitcoin as legal tender”. However, VIXIO can reveal there is no intention of making the decentralised currency legal tender in Brazil.
What caused the confusion?
The news originated from an interview made with federal deputy Aureo Ribeiro who was discussing a proposed bill to regulate virtual currencies, which was moving ahead in the country’s Chamber of Deputies.
In the interview, Ribero said that the regulations will bring Bitcoin under regulatory supervision which will eventually help Brazilians to buy a house, a car or a hamburger in McDonald's in Bitcoin.
These facts have been quickly mingled and mangled in the media, hitting the headlines as plans to make Bitcoin legal tender in Brazil.
What happened in fact?
In reality, Ribeiro has never said that Bitcoin would become a legal tender in the country. He expressed his personal view that the regulations will eventually ease the use of Bitcoin, as well as any other cryptocurrencies, in the country.
The bill that Ribeiro was discussing during the interview was filed by the deputy in 2015 and received a favourable opinion from the Chamber’s special committee on September 29. It will now move to the Chamber’s plenary session and can advance to the Senate only after it is approved in the lower house. If both chambers approve the bill, it will be laid on the table of the President.
So what does the bill do?
Contrary to the news, the actual content of the bill does not infer any broad adoption of cryptocurrencies as means of payment in Brazil, Luciano Oliveira, attorney at Oliveira Lawyers, told VIXIO.
“Quite the opposite, in fact, it is meant to give the Brazilian central bank the authority to regulate any potential use of such alternative currencies,” he added.
The half-page bill, which does not mention Bitcoin, will simply allocate to the Brazilian central bank the responsibility to "regulate the means of payments; including those based on cryptocurrencies and air flight mileage”.
In its current form, the bill is quite generic, Martim Machado, a partner at Chaves, Gelman, Machado, Gilberto e Barboza, noted. Although the text may be modified in the later stages of the legislative process, he said it is unlikely that legislators would add a lot of details and specifics on cryptocurrency regulations. Instead, they will likely establish general principles, definitions and guidelines to be followed by the central bank and other authorities when putting forth detailed and specific regulations on cryptocurrencies and on the players of the crypto ecosystem.
Is Brazil considering making Bitcoin a legal tender anyway?
“Not at all,” Oliveira said, adding that “only people without any understanding of how heavily the Brazilian central bank regulates currency in Brazil would believe so”.
The Brazilian central bank has a history of tightly monitoring the flow of currency in the country with the primary goal of making tax evasion more difficult, according to Oliveira.
“There is an entrained mentality of controlling money and economic activity so people cannot cheat the treasury. It is safe to say that unless there is a way for Brazil to tax transactions based on cryptocurrency, the banking authorities will not even think about allowing them to be accepted.”
He believes the regulations are meant only to enable the Brazilian authorities to tax cryptocurrency.
What is in the pipeline for virtual currencies in Brazil?
Roberto Campos Neto, the central bank's president, has reiterated several times, most recently on September 30, that the central bank is much more concerned with the use of cryptocurrencies as an investment instrument rather than as a means of payment, Machado told VIXIO.
“Accordingly, any future regulation will probably be geared towards ensuring that market players in the crypto ecosystem are subject to the central bank’s oversight and investors in cryptocurrencies/crypto assets are afforded adequate protections when making investment decisions,” Machado noted.
The central bank seems to believe that it will take a while for cryptocurrencies to be used in Brazil as a widespread means of payment because they currently compete with various other payment systems available in Brazil, which albeit not decentralised, are also innovative, secure, user-friendly and fast, Machado explained.
For instance, PIX, the country’s instant payment service launched at the end of 2020, has proven to be a phenomenal success. In the first ten months of existence, PIX already boasts 4.9bn transactions, and is helping to grow digital payments and financial inclusion in the country.
