December 1, 2022

Brazil Approves Crypto Payments

 Brazil Approves Crypto Payments
  • Brazil's crypto bill permits its use as a means of payment, but it doesn't make crypto a legal tender. 
  • Being approved by Brazil's Chamber of Deputies, the bill awaits President Bolsonaro’s signature to be enacted into law.
  • Being a regional powerhouse, Brazil might lead the way to more Latin American countries allowing crypto payments within their boundaries. 

The Chamber of Deputies of Brazil, a federal legislative body, has legalized cryptocurrencies as a payment method throughout the country. 

It is a massive win for the industry, although a notch below what El Salvador did by adopting Bitcoin as a legal tender. 

This is not the first time Brazil has taken crypto-friendly steps. Earlier this year, in June, a similar proposal was issued to allow Brazilians to use crypto as a means of payment and protect their private keys from being taken by courts. 

The bill was approved by the Senate in April but was stuck for the Chamber of Deputies’s approval for a considerable time. Finally, it got greenlighted on Nov. 29, and now it only requires outgoing President Jair Bolsonaro’s signature to be enacted into law.

Once the bill becomes law, the government will decide which office will run the cryptocurrency sector in the country. Meanwhile, tokens considered securities would remain under the Brazilian Securities and Exchange Commission's jurisdiction.

However, this law doesn't make crypto a legal tender in the country. Instead, it includes digital currencies along with frequent traveler rewards from airlines (air mileage programs) in the definition of payment methods.

Bringing VASPs Into Legal Folds

The new law will directly impact all virtual asset service providers (VASPs) that conduct transfers, exchange virtual assets, exchange virtual currencies for local or foreign currencies, or are involved in financial services connected to issuers or vendors of crypto assets.

In addition to approving crypto's usage as a payment method, it is mandatory for virtual asset service providers (VASPs) to obtain a license.

According to local media outlets, all active crypto providers in Brazil will be forced to have a physical entity in the country, with fines and even prison sentences for those breaching the new rules. The bill, however, would give companies a grace period for compliance.

One of the most critical aspects of the regulation is the exchanges are required to make a clear distinction between company and user funds to avoid another incident like the FTX collapse, which misused $10 billion of customer funds. 

Regulators on the watch 

The country has made considerable progress in crypto regulation. But as a FATF member country, Brazil needs adequate AML/CFT safeguards to ensure crypto isn't used in illicit activities. 

For instance, the FAFT, too, has crypto-specific guidelines that countries must adopt, known as the Travel Rule, according to which VASPs must obtain and exchange information on senders and beneficiaries whenever the amount transacted is above $1,000. This is not a hard limit, as countries can lower it if they see a need for it.

Although Brazil hasn't enforced the FATF Travel Rule yet, its move to legalize crypto payments may very well be a catalyst that will compel it to adopt it at the earliest. 

That is not to say that Brazil lacks laws to penalize crimes involving cryptocurrencies, as, under Brazil's regulatory framework, those guilty of fraud involving virtual assets will have to serve a jail sentence between two and six years plus a fine. However, companies will have six months (180 days) to adapt to the new rules before the law is enforced.

Relevant Article: From "Dynamite to Metaverse," Global Community Discusses Crypto's Role in Terror Financing

A Big Win for Crypto

Brazilian crypto advocates support the bill, saying it is essential to establish rules in the industry. After all, the Latin-American country is one of the top ten active markets globally for crypto assets, according to 2022 Chainalysis data. Besides that, it is also the country with the most cryptocurrency ETFs in Latin America. 

As such, Brazil greenlighting crypto's use could boost the adoption of digital assets in the country and enable banks to offer crypto payment services, facilitating the use of crypto for buying and selling ordinary goods.

While banks in Brazil haven't developed a service to process payments in crypto yet, they are already experimenting with crypto custody.  Spanish banking giant Santander's Brazil subsidiary already has plans to offer crypto trading services.

Being a regional powerhouse, Brazil legitimizing the use of cryptocurrencies can also drive neighboring countries to make similar moves. Crypto is already big in Argentina and Venezuela due to inflation, while Paraguay is working on a bill regulating crypto mining and trading.

Relevant Article: Paraguayan President Vetoes Virtual Assets


VASPs need a Travel Rule Solution to begin complying with the FATF Travel Rule. So, have you zeroed in on it yet? Check out Veriscope, the only frictionless crypto Travel Rule compliance solution. 

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