On December 22, 2022, Law No. 14.478/2022, which regulates the market for crypto assets in Brazil, was signed into law.
The new rule defines virtual assets, lays down general guidelines for the provision of virtual asset services, and includes in the Penal Code the crimes of fraud with the use of virtual assets, securities, or financial assets.
The law defines virtual assets as the digital representation of value, which may be traded or transferred electronically and used to make payments or for investment purposes.
This classification does not include traditional (Brazilian or foreign) currencies; funds in reais held electronically; loyalty program points and rewards; and securities and financial assets subject to already existing regulations.
Pursuant to the new law, virtual asset service providers (known as crypto asset brokers) are legal entities that operate, in the name of third parties, at least one of the virtual asset services, such as: exchange between virtual assets and Brazilian or foreign currency, exchange between one or more virtual assets, transfer of virtual assets.
Therefore, these companies may provide virtual asset services exclusively or in addition to other activities.
We note that the service providers may only operate in Brazil with the prior authorization of a body or entity of the federal government.
The regulatory body to be defined (probably the Central Bank) shall establish the conditions and terms, which shall not be shorter than six months, for the virtual asset service providers to adjust to the new rules.
The duties of the regulatory body include the following: to authorize the operation and transfer of control of the brokerage companies; to supervise their operation; to cancel the authorizations, at its initiative or upon request; and to determine the events in which the activities will be included in the foreign-exchange market or be submitted to the regulation of Brazilian capital abroad and foreign capital in Brazil.
The law includes in the Brazilian Penal Code (Decree-Law No. 2.848/1940) a new definition of swindling, attributing the punishment of 4 to 8 years of imprisonment and a fine to those who organize, manage, offer, or distribute portfolios or intermediate transactions involving virtual assets, securities, or any financial assets for the purpose of obtaining unlawful benefit, inducing or maintaining somebody in error, by means of artifice, deception, or any other fraudulent means.
In addition, it amended the Money Laundering Law (Law No. 9.613/98), including crimes committed by means of the use of virtual assets among those aggravated by an increase from 1/3 to 2/3 in the punishment of imprisonment from 3 to 10 years, whenever they are repeatedly committed.
The service providers shall also keep record of the transactions for purposes of transferring information to the bodies that inspect and fight organized crime and money laundering.
The law shall come into force within 180 days as from the date on which it is signed into law, and its main purpose shall be to offer predictability, safety, and modernity to the market for crypto assets in Brazil.
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This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice foreign subsidiary as a comprehensive analysis of the matters referred to herein.