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Law 14,478/22, known as the “Legal Framework for Cryptoassets”, was enacted on June 20, 2023, after 180 days of its publication.

The new legislation establishes what constitutes a digital asset and regulates the responsibilities, including in the criminal area, of service providers and intermediaries.

The Brazilian Central Bank (BC) was assigned as regulator of the cryptoassetsector in Brazil, in addition to taking on a role in authorizing and supervising operators in the sector.

Cryptoassets are virtual goods, protected by cryptography, with exclusively digital records. Crypto operations do not require the presence of financial institutions. Examples of well-known cryptos are Bitcoins and tokens.

Among other points, the law established the crime of fraud with cryptoassets, thus amending art. 170 of the Brazilian Penal Code, and established that the so-called “exchanges” or “VASPs” (Virtual Asset Service Providers), which are providers of virtual asset services, may only operate in Brazil after prior consent from the BC.

Presidential Decree No. 11,563 brought additional regulation to the new Law, setting up rules on the role of the BC and the Securities and Exchange Commission (“CVM”).

CVM will remain responsible for cryptoassets that are considered securities (shares, debentures, bonuses, derivatives, etc.), in their digital version, thus excluding the BC’s competence.

VASPs, on the other hand, will have to organize themselves according to rules defined by the BC to comply with a series of legal requirements and risk controls, already applicable to service providers in other segments (stock brokerage, cards, etc.) in rules such as:

• Minimum capital and capital reserves;
• Third-party capital management;
• Compliance, KyC and anti-money laundering;
• Report of suspicious operations;
• Fighting the use of privileged information; and
• Cybersecurity and data protection.

Overall, this Law is reputed as principle-oriented and does not go into detail about specific rules for trading, custody and technological infrastructure, so additional regulation is still awaited by the market.

Certain issues, such as asset segregation of investors and brokers, may be left to administrative regulation.

Its greatest importance comes from the fact that there is now legal recognition of cryptoassets, their implications for the economy and the insertion of this market within legislation, something still lacking in many countries.

The Law should also pave the way for greater security for investors and participants in the market.