Regulation
The Central Bank of Brazil will finalize the regulation of cryptocurrencies by 2024
On May 20, the Central Bank of Brazil (CB) reiterated its commitment to finalize cryptocurrency regulation by the end of 2024. This initiative aims to establish clear operational standards and authorization processes for virtual asset service providers ( VASP).
The BC aims to ensure a safe environment for crypto transactions in Brazil by improving transparency and investor protection. This regulatory framework will target inappropriate practices that harm consumers, e.g rip-offs and fraud.
Comprehensive history of crypto regulation by the Central Bank of Brazil
This regulatory approach follows Decree 11.563 of 2023. Grants the BC the authority to oversee VASPs while maintaining the roles of the Securities and Exchange Commission (CVM) and Brazil’s Special Secretariat of Federal Revenue (RFB).
According to Nagel Lisanias Paulino of the BC Department of Financial System Regulation, the goal is to refine operational standards and authorization processes for VASPs by establishing minimum requirements and promoting correct interaction with the customer. Under Law 14,478 of 2022, VASPs must obtain BC authorization to operate in Brazil. The operational activities of VASPs include the offering, intermediation and custody of crypto assets.
To know more: Cryptocurrency Regulation: What are the advantages and disadvantages?
“The regulation aims to offer minimum requirements for service providers to carry out virtual asset activities, while also focusing on providing adequate practices in dealing with their customers. The idea is to evolve in the construction of regulatory acts that will deal with virtual asset service providers,” Paulino explained.
The regulatory process will evolve through phases, reflecting the growing understanding of international regulators and guidelines. Key steps for 2024 include developing a second public consultation on supplier performance and authorisation, establishing internal planning for stable currency regulation and improvement of the complementary framework for VASP activities.
Furthermore, the BC will collaborate with other bodies to address specific issues related to virtual assets, in particular the regulation of stablecoins in the payments and foreign exchange market. The BC aims to finalize regulatory proposals using insights from public consultations. This collaborative approach ensures that regulations benefit from public and market input, producing high-quality, well-informed standards.
Furthermore, the regulation aims to maintain the stability of the national financial system. It will focus on various aspects, such as anti-money launderingthe fight against terrorist financing and the monitoring of suspicious activities.
The regulatory clarity in Brazil comes at a crucial time. This was revealed by a recent report from Kaiko significant growth in the Brazilian cryptocurrency market. Despite recent market corrections, Brazilian real (BRL) trading volumes have increased by 30% compared to last year.
To know more: Stablecoin regulations around the world
Weekly trading volume in BRL. Source: Kaiko
Furthermore, from January to early May 2024, the BRL-denominated cryptocurrency trading volume reached $6 billion. This figure makes Brazil the largest market in Latin America (LATAM) and places it seventh among global fiat currencies.
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