This article is from cointelegraph.com.br and the original article can be read here in Portuguese
The terms of the Bitcoin Law pending in Congress may prevent customers of foreign exchanges from withdrawing reais from cryptocurrency transactions if the platform does not act in full compliance with the new Brazilian legislation, said lawyer and professor at Insper and Ibmec, Isac Costa, participating in the Cripto+ program.
In practice the Bill No. 4,401 passed in the Senate on Tuesday, 26, replacing PL 3.825/2019, determines that exchanges based abroad that do not fully comply with the new legislation will be considered illegal. The bill will now be sent for analysis in the Chamber of Deputies and, if approved, must be sanctioned by the President of the Republic to then enter into force.
According to Costa, customers of foreign exchanges will not necessarily be prevented from using foreign exchanges or DEXs (decentralized exchanges) to carry out operations for the purchase and sale of crypto-assets.
However, if they want to convert their cryptocurrencies into reais and transfer them to their bank accounts, Brazilian investors will have to transfer their cryptocurrencies to a legalized exchange under the new law, the lawyer explained:
“When the funds are in the crypto world, you can transfer to cold wallets [non-custodial digital wallets without an internet connection], and do whatever you want. But the state controls when you go from fiat currency to crypto, and vice versa, controls customs from the real world to the virtual world. So, faced with an enforcement action by the authorities, an investor who has funds in these exchanges, if they are not regularized, may have their access to the national financial system blocked.”
Even so, warned Costa, investors who keep their crypto-assets in their own custody could have problems with the IRS due to the prior lack of knowledge about the origin of these assets.
The terms of the approved PL represent a victory for Brazilian exchanges, which have long demanded the definition of clear and uniform rules for companies that offer services for the purchase and sale of cryptocurrencies in Brazil.
According to the agents of the Brazilian market, the absence of a regulatory framework created unequal conditions of competitiveness, favoring companies without legal representation in Brazil, and therefore immune to the control of regulatory bodies of the financial system.
The lawyer also stated that the regulatory framework will not only oblige foreign exchanges to adapt to the new reality of the Brazilian cryptocurrency market, but also the clients of these companies will need to be more attentive to their tax obligations:
“Investors who already have accounts with these service providers, if they join the regulation, may have a problem with the omitted information from the tax authorities. It’s not that these exchanges will make a retroactive declaration, but before you were in a more comfortable position , you didn’t need to control your operations, you didn’t need to declare it in the Income Tax, and now you’ll have that job.”
Sought by Cointelegraph Brazil to comment on the statements of professor and lawyer Isac Costa, global exchanges Binance and Crypto.com issued official announcements through their press offices, reaffirming their willingness to comply with the terms of Brazilian legislation as soon as the new rules come into force.
Brazilian market leader, with a 48.55% share of total Bitcoin (BTC) traded in the country in March, Binance stated through the note that it is a mistake to suggest that the obligation of foreign exchanges to adapt to the new law could penalize users in some way.
Binance will comply with Brazilian laws: ‘We are not evolved enough to live in a society without rules’, says CZ. Check below the full note sent by Binance to Cointelegraph Brazil:
Binance is the largest global infrastructure provider for the blockchain ecosystem and cryptocurrencies and is leading the way in the development of this industry around the world, working in partnership with regulators, legislators and governments to ensure a safer environment.
Binance is fully committed to compliance and believes that regulation is the only way for the crypto industry to develop and reach the general public.
Binance reiterates that it supports regulation of the cryptocurrency industry to protect investors and users. To suggest that the regulation under discussion in the country would create a context in which, when seeking the adequacy of an exchange, the user would end up being penalized is a blatant mistake. There is no regulatory provision that creates hypotheses in which users are excluded from the national financial system. This would be contrary to the spirit of this Bill that regulates the operation of exchanges in Brazil, whose objective is to democratize access. At Binance, serving and protecting the user is a priority, and we aim to help expand crypto adoption and generate positive impact for our users, the crypto and blockchain community, and society as a whole in Brazil.
As Cointelegraph Brasil recently reported, on April 4th, Binance Holdings has become a partner of BFintech, a company located in the Brazil, in yet another step towards officializing its operations in the country.