In a move that could provide a glimmer of hope for the embattled global cryptocurrency industry, Brazil has passed a regulatory framework that legalizes the use of digital currencies as a payment method within the country. It is estimated that around 10 million Brazilians, or approximately 5% of the population, trade in cryptocurrency.
The largest centralized exchange in Brazil is a local business called Mercado Bitcoin, with approximately three million users. International players such as Coinbase and Gemini do not have a significant presence in the South American nation.
Brazilian Securities and Exchange Commission Pursues Legal Changes
The regulatory framework passed by Brazil’s lower house comes as the global crypto community continues to grapple with the fallout from the FTX collapse and a liquidity crisis affecting both centralized exchanges and decentralized finance. It is yet to be determined whether the regulation triggered by the FTX bankruptcy will have a positive impact on the cryptocurrency industry.
The Brazilian Securities and Exchange Commission is exploring changes to the country’s legal framework concerning the regulation of cryptocurrencies. In 2021, the securities regulator approved a sandbox structure for the testing of blockchain companies and solutions.
Central Bank of Brazil Plans Digital Currency Pilot
The Central Bank of Brazil has also stated its intention to launch a sovereign digital currency pilot before the end of the year. CEO of Brazilian climate tech firm Moss.earth, Luis Felipe Adaime, said: “The central bank innovated massively in 2020 with the PIX, an electronic instant payment method that has gained wide acceptance in the country. Considering the success it’s had so far I would imagine that the next natural step would be to have the PIX on-chain.”
The legal framework passed by the Brazilian Congress does not make Bitcoin legal tender, as was achieved in El Salvador. However, the legalization of cryptocurrency as a payment method is a step in the right direction in encouraging local businesses to adopt and transact using digital currencies.