On 29 November 2022, the Plenary of the Federal Senate approved the final text of Bill of Law (in Portuguese: Projeto de Lei — PL) No. 4,401/2021 (formerly PL No. 2,303/2015) in which the Deputy Expedito Netto (Brazilian Democratic Party-Rondônia) is the rapporteur. Currently, PL No. 4.401/2021 is in the final processing stage, which consists of the Brazilian president’s sanction.
In summary, PL No. 4,401/2021 aims to regulate service providers of the “virtual assets” market (which includes the denominated “cryptoassets”), as well as adapt the wording of the Brazilian Penal Code (Law-Decree No. 2,848/1940), the Brazilian Law on Crimes against the National Financial System (Law No. 7,492/1986) and the Brazilian Law on Crimes of Money Laundering or Concealment of Assets, Rights and Values (Law No. 9,613/1998).
PL No. 4,401/2021 provides for the guidelines to be observed in the provision of services in the denominated “virtual assets” market, as well as in the issuance of rules by the appointed competent regulatory body(ies).
In summary, “virtual assets” are digital representations of value that may be (i) electronically traded or transferred, and (ii) used as payment instruments or for investment purposes. This excludes securities (e.g., shares and debentures) and other regulated financial assets (e.g., bonds issued by the Brazilian Federal Government), local currency (i.e., reais), foreign currencies, electronic money (i.e., the electronic representation of the national currency or foreign currencies) and points/rewards from benefit programs.
Virtual asset service providers are defined as legal entities that carry out, on behalf of third parties, the exchange of virtual assets for national or foreign currency, the exchange between virtual assets, the transfer of virtual assets, the custody or management of virtual assets or instruments that enable control over virtual assets, and/or participation in financial services and provision of services related to the offer or sale of virtual assets by issuers.
Within the scope of service provision, PL No. 4,404/2021 establishes the observance of good governance practices, a risk-based approach, information security and protection of personal data, protection and defense of consumers and users, protection of savings, and prevention of money laundering and terrorist financing.
The Brazilian Executive Authority will appoint the competent Federal Public Administration body(ies) to regulate the operation and supervise the activities of the virtual asset service providers.
Such body(ies) will mainly be responsible for: (i) authorizing the operation, transfer of control, merger, spin-off and incorporation of virtual asset service providers; and (ii) establishing the cases in which the activities and operations carried out by the virtual asset service providers will be included in the context of the Brazilian foreign exchange market or subject to the regulation of Brazilian capital abroad and foreign capital in Brazil. In addition, such body(ies) of the Federal Public Administration will have to establish the conditions and deadlines (no less than six months) for adapting virtual asset service providers already in activity to the new normative and regulatory provisions.
In the context of criminal legislation, PL No. 4,404/2021 provides for changes in Article 171-A of the Brazilian Penal Code; Article 1, sole paragraph, II and III, of the Brazilian Law on Crimes against the National Financial System; and Article 1, §4, Article 9, sole paragraph, XIX, and Article 10, II of the Brazilian Law on Crimes of Money Laundering or Concealment of Assets, Rights and Values, to include virtual asset service providers in the list of institutions subject to their provisions.
Our Regulatory, Banking and Capital Market teams are available to provide further clarification on the subject.
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