Brazil Central Bank Plans Multi-Phased Crypto Regulations by Year’s End

Brazil’s crypto industry faces a wait-and-see approach as the central bank implements a multi-phased plan for crypto regulation. Announced on May 20, 2024, the Banco Central do Brasil (BCB) plans to finalize its regulatory proposals by the end of this year, marking a shift from the previously expected June 2024 completion date.

Brazil’s multi-phased approach follows a 2022 law that granted the BCB the authority to regulate the crypto industry.  While initial projections by Otavio Damaso, the bank’s director of regulation, suggested a swifter timeline, the BCB now emphasizes the need for a comprehensive framework.

Public Consultation Shapes Crypto Regulation

The delay in implementing regulations by the BCB results from their commitment to extensive public consultations. The first consultation, held between December 2023 and January 2024, aimed to gather input from society beyond the scope of the 2022 law. A key focus was asset segregation for virtual asset service providers (VASPs).

The BCB acknowledges the complexity of regulating the diverse crypto sector. They emphasize the importance of a solid foundation before drafting specific regulations, highlighting the need for reasonable dedication from the involved teams.

In the latter half of 2024, a second public consultation will use initial input from the public to shape the actual regulatory texts. The BCB is committed to gaining “broad support from society” to establish a robust framework.

The regulatory efforts align with a busy phase for the BCB. Currently, the bank leads the G20 Techsprint program, an international initiative investigating central bank digital currencies (CBDCs). On the domestic front, the BCB actively develops DREX, its wholesale CBDC project.

Campaign Finance Crypto Donation Ban

The BCB’s re­gulatory efforts come amidst a broader crackdown on cryptocurre­ncy use in campaign finance. The last wee­k, Brazilian authorities solidified a ban on political parties and candidate­s receiving crypto donations.

The e­lectoral court, which supports the ban, highlighted the­ importance of transparency and traceability in campaign financing. Ensuring that the­ elections are fre­e from irregular or illegal practice­s remains a top priority.

Brazil’s crypto industry faces a period of cautious optimism. Although the­ regulatory timeline has change­d, the BCB’s efforts to involve the­ public are encouraging. The coming months will be­ crucial in shaping the future of cryptocurrency use­ within the Brazilian economy.

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