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Senate Postpones Crypto Regulation Vote

Regulation was debated during Brazil Conference 2022.

The Senate postponed from Tuesday (19) to Wednesday (20) the regulation of cryptocurrencies through the bill 3,825/2019. However, the vote did not happen on that day. This is because the vote on provisional measure 1.075/2022, on the University for All Program – Prouni, locked the agenda, that is, it needed to be voted on and generated the suspension of other discussions.

Senator Irajá (PSD-TO read his report, which made changes to Senator Flávio Arns’ project (Podemos-PR). In this way, the substitute incorporated ideas from PL 3,949/2019, by Senator Styvenson Valentim (Podes-RN), and PL 4.207/2020, by Senator Soraya Thronicke (União-MS). If approved in the Senate, the project will be analyzed in the Chamber of Deputies.

As the blockchain ecosystem grows, governments are also racing to regulate the sector. Even though this goes against the “root blockchain” principles. According to Marcelo Sampaio, co-founder and CEO of Hashdex, “there will be a world of regulation in the next ten years. Governments will need to do this to get comfortable with the technology.” And that will be based on what exists today to regulate financial assets, with adaptations for crypto, he says. But, “I don’t think crypto is tunable in the long run.”

This is because cryptocurrencies are similar to the internet, which develops quickly and affects and changes the various sectors. The difficulty also lies in the fact of the size of the market and the amount of new cryptocurrencies. Thus, what will be possible is to have guidelines, completed Sampaio on the panel “Instigating Pioneering in Blockchain and Cryptocurrencies”, during the Brazil Conference 2022, which took place on April 9 and 10. The event is organized by Brazilian students from Harvard University.

For Fabricio Tota, director of New Business for Mercado Bitcoin, regulation must guarantee a minimum development and organization of the sector. “There are some things that we don’t accept as a society. We do not accept fraud, money laundering and terrorist financing.” For him, Russia’s war against Ukraine raised the debate on points like using cryptocurrencies to avoid economic sanctions.

Tota gave yet another example of what happens in the world of cryptocurrencies. It can happen that an unidentified programmer creates code for decentralized finance (DeFi), leaves the code on the network and disappears. But it could be for an operation that a country doesn’t allow. Who to turn to? “It cannot be anything goes and it can be anything.” Therefore, he defended actions to know the history of transactions (Know your transaction, KYT).

Anyone who invests in a business wants to have legal certainty, said Fabio Araújo, coordinator of the Central Bank’s (BC) digital real project. This prevents a regulator or jurist from deciding to close the deal without clear grounds. “I know that legal certainty at the moment is very complicated. We are trying to regulate a lot on ‘principiology’.” But, he added, it is necessary to have some tool to guarantee that the negotiations are suitable and within what society considers acceptable.

Cryptocurrencies are driving regulators around the world, including central banks, to study the issue and even reverse the normal order of regulation. “The regulator is always chasing technology and technology is always accelerating. Even so, the regulator is trying to be more proactive”. The PL under discussion in the Senate provides that the BC should establish the details of cryptocurrency regulation.

“If you wait for the dust to settle, it may never settle”

Regulation was one of the themes of the Brazil Conference 2022 with Sampaio, Tosta, Araújo and Portilho.

According to him, the natural course would be for BCs, “to wait for the dust to settle and then enter the field. We know that the dynamics today are much faster. If you wait for the dust to settle, it may never settle. So, we have to enter and we have to try to provide as much security as possible using regulation without curbing innovation”. Innovation, he added, “brings new products, new features and well-being. It is a very big challenge that regulators are facing.”

There is a certain advantage regarding the complexity of regulation in Brazil compared, for example, with the United States (USA). There, there are more than 47 regulators, in addition to state ones. The financial market is more sophisticated and this is reflected in the regulatory scenario, said André Portilho, responsible for the digital assets area at BTG Pactual. It is a scenario that even increases the cost of transiting that market, added Sampaio. Meanwhile, in Brazil, the regulators are basically the BC and the Securities and Exchange Commission (CVM).

Financial rules need updating

Both Portilho and Sampaio stressed that current finance regulations need review in all countries. A sign of this is that in the US, the rules for index funds (ETFs) date back to 1933. Therefore, they are the ones that regulate today also ETFs that seek to focus on cryptoassets, which Satoshi Nakamoto launched on the market in 2008. with bitcoin, that is, 55 years later.

The US may even be behind schedule, but no one doubts its ability to catch up on time. Also because money, which is one of the necessary factors for this, is something that is not lacking there.

According to Portilho, Pantera Capital, one of the US venture capital funds that most invests in the blockchain ecosystem, has historically allocated 31% of its investments to companies and protocols outside the country. “In the last year, it was 51%”. This may indicate investments in more flexible regulatory environments. As for Tosta, they may also indicate that there is room for a regulatory environment in Brazil that encourages the creation of an innovation hub here. “There is still time,” he added.

*The translation of this article is provided by EmergingCrypto.io, a partner of Blocknews.

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