Regulation of ‘virtual assets’ institutionalizes ‘trading 171’ and access to platforms is the responsibility of the federal government

Without using the terms cryptocurrencies and crypto assets, the Federal Senate approved last Tuesday (26) the Bill (PL) that provides for the regulation of “virtual assets” in Brazil, a proposition that was the result of a turnaround. That’s because the text initially guided, PL 3825/2019 authored by Senator Flavio Arns (Podemos – PR), ended up being harmed according to what appears on the Legislative House portal. On the occasion, the rapporteur of the project, Senator Irajá Abreu (PSD-TO), presented a substitutive version of another project that was in the Senate, PL 4401/2021, authored by federal deputy Aureo Lidio (Solidariedade/RJ), proposed that transfers to the federal government the attribution of regulating the market of virtual assets in Brazil and that changes the Penal Code by creating article 171-A for crimes involving these assets.

Lidio’s PL arrived in the Senate after being approved in the Chamber of Deputies, because the matter involves finance and, therefore, it needs to pass with the same content in the Senate and in the Chamber, where PL 4401/2021 returns to be analyzed due to of the amendments tabled by Irajá. The rapporteur incorporated some proposals from PL 3825/2019 by Flavio Arns and from two other projects that were being processed in the House, PL 3.949/2019, by Senator Styvenson Valentim (Podemos-RN) and PL 4.207/2020, by Senator Soraya Thronicke ( União-MS), in addition to amendments presented by other senators.

Regarding trading and other operations involving virtual assets, the approved text (by Aureo Lidio) presented significant changes, since the subject was little addressed in the previous project (by Flavio Arns), which directed to exchange activities. With the approval of the substitutive text, access by individuals to platforms operating in Brazil is not guaranteed, and virtual assets listed on brokerage firms will still need approval from the federal government. This is what is provided for in two paragraphs of Article 3:

§ 1 The Federal Public Administration body or entity defined in an act of the Executive Power will be responsible for establishing which will be the regulated financial assets, for the purposes of this Law.

§ 2 The opening of an account in providers of services of virtual assets and the carrying out of operations with virtual assets and their derivative products by bodies and entities of the public administration are authorized, in the cases provided for in a regulation to be issued by an act of the Executive Power.

The bill approved in the Senate also provides for the inclusion of crimes involving virtual assets in the Penal Code, establishing that:

Art. 10. Decree-Law No. 2,848, of December 7, 1940 (Criminal Code) becomes effective, plus the following article 171-A:

“Fraud in the provision of services of virtual assets, securities or financial assets

Art. 171-A. Organize, manage, offer portfolios or intermediate operations involving virtual assets, securities or any financial assets in order to obtain an unlawful advantage, to the detriment of others, inducing or keeping someone in error, through artifice, ruse, or any other fraudulent means.

Penalty – imprisonment, from 4 (four) to 8 (eight) years and a fine.”

NFTs stay out

Non-fungible tokens (NFTs) were not included in the project, since Senator Irajá justified that these types of virtual assets serve as a kind of digital certificate of a service or a product. The parliamentarian added that “the NFT, which is a kind of digital certificate of a service, many know even as a kind of fund, which can even be used to launch, for example, an NFT for soybean production, from the harvest of a future year, that this matter may indeed be regulated by the Executive in an act subsequent to the approval and if this law is sanctioned by the President of the Republic.”

Virtual Asset

When analyzing the bill approved by the Senate in an article published on his profile on Linkedin, lawyer and technologist in the Internet of Things, Fernando Lopes, explained that the legislator used the technique of “open types” by replacing the term “cryptocurrencies” with “digital assets”, which would be a strategy to “make it as broad as possible.”

In turn, the preliminary meaning of the concept of virtual asset was defined in article 3 as being “the digital representation of value that can be traded or transferred by electronic means and used for making payments or for investment purposes”(. ..)

Section IV of article 5 makes it clear that it is not only the custody or administration of virtual assets that will be disciplined by law, but also the “instruments that allow control over virtual assets”, which certainly includes platforms that, in some way, allow the control of these assets, added the lawyer.

Senator Irajá Abreu also made an explanatory addendum to the approved project:

But for clarification, President [of the senate], I would like to first highlight the considerations of Senator Portinho, who, in art. 3, read: For the purposes of this law, a digital representation of value that can be traded or transferred by electronic means and used for making payments or for investment purposes, not included (… ).

Popularized as the “Bitcoin Law”, the project also may prevent withdrawals in reais on foreign exchanges that do not comply with the regulatory framework, according to the evaluation of the lawyer and professor at Insper and Ibmec, Isac Costa. He stated that customers of foreign exchanges that do not act in accordance with the new law may be prevented from making withdrawals in reais, making profits from cryptocurrency operations, as reported by the Cointelegraph Brazil .