Cryptocurrency Law Approved in Brazil — Green Mining Tax Exemptions and Asset Segregation Issues Left Out

A cryptocurrency law, which had been in discussion for several months, has been approved by the Chamber of Deputies in Brazil after having shed some of the changes presented by the Senate. The proposal left out two planned tax exemptions for green mining operations and the issue of segregating customer assets from company funds for virtual assets service providers (VASPs).

Cryptocurrency Law Finally Approved in Brazil

The cryptocurrency law project identified with the number 4.041/2021, was approved by the Chamber of Deputies in its session on Nov. 29. The law project, whose discussion and approval were postponed several times due to the general elections realized last month, will now have to be ratified by president Jair Bolsonaro, who must sanction it before declaring it law.

Deputies voted to shed most of the changes that the Senate had proposed, allowing the law to be approved in a more general form, and providing the opportunity for more specific rules to be formulated later. Deputy Expeditto Neto, the rapporteur of the bill, remarked on the importance that this law has for the country. He stated:

We are voting on a historic matter. Today, the country is ahead of others when it regulates activity with digital assets. We have the support of the current government and the future government for the matter.

Per local media reports, the discussion of the law was rushed due to the unknown stance that the government of president-elect Luis Inacio Lula Da Silva would have on the matter, with some deputies claiming that the bill might find resistance with the new government, which is slated to be inaugurated on January 1.

Asset Segregation and Other Elements Left Out

An issue that was left out of the final document was the tax cut proposed to be applied to cryptocurrency mining industries that used green energy in their operations. The rapporteur of the project recognized that tax-related regulation should be defined in another bill regarding this matter.

Another challenge was the issue of customer asset segregation, which would force virtual asset service providers to separate customers’ funds from their own funds. This was one of the focal points of the discussion, with many deputies supporting it to allow users to avoid loss of funds such as occurred in the recent collapse of leading crypto exchange FTX.

The anti-segregation side prevailed, with analysts stating that not leveraging customer funds to operate might limit the portfolio that…