Brazil legalizes crypto as payment method, no legal tender status

The bill was approved by the Chamber of Deputies of Brazil on Tuesday evening and now only requires the President’s signature to go into effect.

Bitcoin stack with Brazil flag in the background - stock photo

Brazil’s federal legislative body, the Chamber of Deputies, passed a complete regulatory framework that recognizes cryptocurrencies as a payment method and an investment asset, yet doesn’t grant them legal tender status within the country. The new legislation is expected to boost the country’s already vibrant crypto economy, which boasts the most crypto ETFs in Latin America.

The bill, signed under code PL 4401/2021, includes digital currencies and airline loyalty bonuses (commonly known as “miles”) in the definition of “payment agreements” that are under the supervision of the Central Bank of Brazil (BCB). Meanwhile, the assets that will be deemed securities must remain under the jurisdiction of CVM, Brazil's equivalent to the SEC, the document states.

The new regulation also obliges crypto services providers to obtain licenses for operating their activities in the country. Additionally, the law requires cryptocurrency exchanges to separate their funds from those of their clients, a measure meant to prevent a situation similar to that of FTX, when the company used customers’ money to conduct highly leveraged trades.

Initially, the bill also included a clause that sought to provide tax benefits to crypto miners that use renewable energy sources. However, it was rejected on Tuesday’s vote and the final version of the new law was passed without the clause.