Brazilian government starts cryptocurrency regulation… too late for some
May 08, 2020
BY MARIANA LÓPEZ
Cryptocurrency startups and enthusiasts in Brazil have a reason to celebrate. The government announced that, as of next May, cryptocurrency exchanges will now operate under a designated code (“6619-3/99”). This little number from then on out will refer to the “brokerage and possession of crypto-assets.”
Why it’s a big deal: this move further legitimizes the role cryptocurrencies have in the Brazilian economy as a whole. Likewise, it validates the circulation of these digital assets in the country.
Win-win for the government and cryptocurrency users?
What convinced the Brazilian government to move forward with this decision is related to fraud and money laundering prevention. Here’s how it works.
The Brazilian Institute for Geography and Statistics (IBGE, for its acronym in Portuguese) hosts the National Classification of Economic Activities (CNAE).
Within this classification, all economic activities are assigned a code. When a business registers under the government, they’re tagged with one of these codes. That way, authorities can oversee which enterprise does what.
For a recap on what cryptocurrencies are and how they work, here’s a vid covering Bitcoin:
And so as to prevent money laundering or fraud through criminals “mislabeling” themselves, authorities can better keep track of where assets (digital or not) are.
Up until now, cryptocurrency exchanges used codes that were the closest thing in reference to the operation of digital assets. But nothing addressed them directly.
It’s the hard knock life for cryptos in Brazil
As you may have guessed, there’s no specific regulatory framework that addresses cryptocurrencies in Brazil. At the most, tax authorities demand crypto exchanges disclose the records of the transactions processed through their systems on a monthly basis. That, or face a fine.
These developments further explain why this code news is a welcome sight.
And overall, 2020 has been a tough year for crypto exchanges in this Latin American country.
In February two Brazilian crypto exchange startups—Acesso Bitcoin and Latoex—announced they’d cease operations. Then in March, a major Bitcoin exchange, Xdex, announced it would be shutting down due to the challenge of working in an “unregulated market.”