The regulation of cryptocurrencies, on the one hand, can give greater legal certainty to those who trade them by bringing rules on how transactions should be made. However, on the other hand, it can have the reverse effect and result in barriers to the market that has grown worldwide after the entry of institutional investors.
O market expects to have a minimum of legal certainty to learn how to deal with the agencies that oversee operations with cryptocurrencies. In this way, the absence of specific regulation can be disturbing for everyone, but it needs to be thought.
This theme is always complex, as it requires knowledge of what is sought to regulate. When it comes to cryptocurrencies, it gets more complicated. Digital currencies do not have a defined legal nature and can be used as a medium of exchange, security and even commodities digital.
In Brazil, currently, there are four regulation proposals for these encrypted assets. The first of these was presented to the Chamber of Deputies in 2015. The bill (PL) No. 2,303 / 2015, authored by federal deputy Áureo Ribeiro (Solidariedade / RJ), aims to treat cryptocurrencies and air miles as payment arrangements to be supervised by the Central Bank (Bacen).
Four years later, the same deputy presented a new project (PL No. 2,060 / 2019), with the objective of regulating only cryptocurrencies to be inspected by the Securities and Exchange Commission (CVM) and by Bacen, as appropriate. That same year of 2019, Senator Flávio Arns (Rede / PR) presented the PL nº 3,825 / 2019, which was based on regulating the activity of cryptocurrency marketplaces, including exchanges.
In 2020, it was Senator Soraya Thronicke’s (PSL / MS) turn to present the PL No. 4,207 / 2020. This project seeks to regulate intermediation and negotiations with any virtual assets, including cryptocurrencies.
Cryptocurrencies as a payment arrangement
The first project to regulate cryptocurrencies came with just four articles. Although concise, PL No. 2,303 / 15 suggested that Bitcoin and other cryptocurrencies should be treated as a kind of payment arrangement.
The proposal, if approved with the current wording, will modify other existing laws. One of them is the Law No. 12,865 / 2013, which deals with the payment arrangements supervised by Bacen.
In addition to this, the Law No. 9,613 / 1998, which provides for crimes of “laundering” and concealment of assets. It is also popularly known as the “Money Laundering Act”.
Item I, of art. 9 of Law 12.865 / 13 currently mentions that the competence to discipline payment arrangements is with Bacen, according to guidelines established by the National Monetary Council (CMN).
The idea in this project was to include in this device the phrase “including those based on virtual currencies and airline miles programs”.
Something similar happened with the financial operations that constitute serious evidence of a crime of money laundering. If the project is approved, art. 11 of the “Money Laundering Law” will include a device to deal with suspicious operations with cryptocurrencies and air miles.
At the time, the project brought in its justification that there was a “growing concern with the effects of transactions carried out by means of these instruments”.
The proposal even brought a special report from the European Central Bank (ECB) with the aim of exposing the risks of the cryptocurrency market that should be monitored.
However, the ECB itself stated that there was no need for the immediate introduction of more active regulation on cryptocurrencies.
Cryptocurrencies as transferable securities
The same deputy, four years later, changed his mind and decided to present a new project. O PL nº 2.060 / 2019 could not be compared to the previous one. The focus was on cryptocurrency regulation only.
Even the term “virtual currencies”, which is a genre and encompasses online gaming currencies, has been replaced by “crypto”.
In this new proposal, the objective was to regulate cryptocurrencies according to their use. In art. 1, the project mentions that crypto assets “encompass assets used as a means of payment, reserve of value, utility and security”.
Therefore, if used as a security, the Securities and Exchange Commission (CVM) will act. Now, if the use is as a means of payment, the competence must be that of Bacen.
The proposal was mature when dealing with item III, of art. 2nd, the differentiation of utility tokens and security tokens. In this device, the PL No. 2,060 / 2019 establishes that the “utility cryptography” is not subject to this regulation, which focuses on dealing only with encrypted assets offered as an investment under the terms of Law 6,385 / 76 or used as a means of payment.
Differentiating tokens
The question as to the differentiation of utility tokens and security tokens was created from a United States Supreme Court decision still in 1946, in which it involved a discussion about the performance of the United States Securities and Exchange Commission (SEC) on the public offer of the Howey Company. Until then, there was no answer to what today is called a collective investment contract.
The parameter, then, was to establish a test to determine whether (i) the contract in question involves investment of money; (ii) if it is made with a joint venture and (iii) if there is, in the acquisition of the contract, a reasonable expectation of profits derived from the efforts of third parties.
If the answers are positive, what you have is a security. So, then, the so-called “Howey Test” came into use, used today by the SEC. In Brazil, the elements of the Howey Test are contained in the Securities Law, which defined this institute as a Collective Investment Contract, in which case CVM’s activities are responsible.
Fight against the pyramids
PL 2.060 / 2019 also paid attention to the updated importance in view of the problems involving the repeated cases of suspected ponzi schemes and financial pyramids with cryptocurrencies.
The author of the project suggested modifying the so-called Law on crimes against the popular economy (Law No. 1,521 / 1951) in order to include the term “financial pyramid” in that law and to increase the penalty for similar practices.
Until then, the law provides for a penalty of detention from 6 (six) months to 2 (two) years, and a fine for this type of conduct. Instead of detention, the bill provides for imprisonment and the sentence would go on for a minimum of one year and a maximum of five years, plus a fine.
In brief summary, with the maximum abstract penalty in up to two years if the suspect were convicted of a financial pyramid practice, he would serve under the open regime as long as he was not a repeat offender, thus being able to serve the sentence at home.
The move from detention to confinement was also no accident. O penal code makes it clear, in art. 33, that detention cannot be carried out in a closed regime. This type of regime can only be applied to imprisonment sentences.
The projects No. 3,825 / 2019, by Senator Flávio Arns (Rede / PR) and No. 4,207 / 2020, by Senator Soraya Thronicke (PSL / MS) also raised concerns about suspected cases with cryptocurrencies and reinforced CVM’s control in cases of investment offer with these assets.
These two proposals presented in the Senate, however, seek to regulate activities with cryptocurrencies more than to define the legal regime for such complex assets.
Exchanges regulated by Bacen
PL No. 3,825 / 2019 was concerned with the performance of electronic cryptocurrency trading platforms, including the competence of the Central Bank to inspect them. If this project is approved, the operation of exchanges in Brazil will depend on their approval by the Central Bank, as is already the case with financial institutions.
The same project also reinforced the CVM’s performance in cases of public offerings of crypto assets under the terms of the collective investment contract. The inclusion of cryptocurrencies in art. 2 of the Securities Law.
In addition, the proposal made it clear that there should be a separation of the exchange’s assets and assets held by it in bankruptcy cases.
This proposal suggested that those who fraudulently managed cryptocurrency exchanges should be held accountable for the Law on crime against the Financial System (Law No. 7,492 / 86), under penalty of imprisonment from 3 (three) to 12 (twelve) years, and a fine. .
If the case still involved the practice of a financial pyramid, there would be an increase in the minimum sentence from three to six years in prison.
Bill 4.207 / 2020, on the other hand, mentioned that there would be an increase in the penalty for anyone involved in a pyramid scheme, but what happened in the proposal was only to submit those involved to the Federal Law on crimes against the Financial System, under the same penalty already provided for in Law 1.521 / 51 (Law on crimes against the popular economy).
In other words, nothing changes in the legal provision for a six-month to two-year prison sentence and a fine.
Increasing transaction security
Although PL No. 4,207 / 2020 does not advance much at the point of fraudulent activity with cryptocurrencies, it does bring obligations to companies that issue, trade and broker these assets to the point of increasing security in the market.
When mentioning that these companies must maintain the adequate security system and internal controls, ensuring the electronic system with the adoption of measures to prevent loss, deterioration or theft of virtual assets, the proposal is providing more security to the investor.
The problem, however, is that the project does not mention what would be the appropriate system and what would be the measures to avoid the aforementioned risks. Consequently, this it can go against what is desired and increase legal uncertainty.
On the other hand, there is a reinforcement of the role of the Federal Revenue in the inspection of transactions with these assets, which is already done through Normative Instruction No. 1,888 / 2019. Without pretending to define the legal nature of crypto assets, PL 4,207 / 2020 provides for the CVM to act in cases where cryptocurrencies are used as security and for the Central Bank in cases where the assets are used as a kind of payment arrangement .
In addition, the proposal strengthens the supervision of the Financial Activities Control Council (COAF) in cases of suspected money laundering with cryptocurrencies. A strange question in the proposal is to deal with the institute of the National Register of Politically Exposed People (CNPEP) in a project to regulate cryptocurrency transactions.
On the one hand, this can on the one hand give a negative aspect to the market and on the other hand, it is a matter foreign to the object of the bill.
Performance of CVM and Revenue
Despite the existence of the four projects, there is no regulatory framework for cryptocurrencies in Brazil. Not having specific regulation is not synonymous with the lack of rules in your transactions.
This became clearer after the performance of the Brazilian Securities and Exchange Commission (CVM) based on Law No. 6,385 / 76 and of the Federal Revenue of Brazil (RFB), which made it mandatory to declare transactions with cryptocurrencies through Normative Instruction No. 1,888 / 2019.
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