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Cryptocurrency Market Regulation Movement (BR X USA)

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On March 9, 2022, United States President Joe Biden signed an executive order determining and directing Federal Government agencies to proceed with the study of the possible risks and benefits of cryptocurrencies, as well as the possibility of creating a U.S. digital currency (Central Bank Digital Currencies – CBDC). According to the executive order, “the development and growing adoption of digital assets require an evolving and aligned approach by the United States government to digital assets.”

It is noted that the executive order does not determine specific regulations for the cryptocurrency market, it only requests that federal agencies such as the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) adopt a unified approach to the regulation and supervision of digital assets.

The six main objectives brought by the executive order consist of: (i) ensuring consumer and investor protection; (ii) ensure financial stability; (iii) mitigate the illicit activities resulting from the misuse of digital assets; (iv) guarantee the competitiveness of the United States in the global financial system; (v) promote access to financial services in a safe and accessible manner; and (vi) ensure responsible innovation of digital assets.

Regarding the possibility of creating an American digital currency, the president’s announcement clarifies that “a United States CBDC may have the potential to support efficient and low-cost transactions, particularly for international fund transfers and payments, and promote greater access to the financial system, with less risk posed by digital assets managed by the private sector.”

Finally, the executive order sets a deadline of 180 days for the heads of the country’s main relevant agencies to present to the president a report on the future of money and payment systems, including the conditions driving the wide adoption of assets and the implications for the U.S. financial system.

In relation to Brazil, there is also a movement of the legislative branch to establish a possible regulation of the cryptocurrency market in the country. In this sense, on February 22, 2022, the Economic Affairs Committee (CAE) of the Federal Senate approved a bill dealing with financial transactions made with cryptocurrencies or digital currencies in Brazil, also known as the “Regulatory Framework for Cryptocurrencies”. The bill’s summary proposes regulation through the definition of concepts, guidelines, licensing system for Exchanges, supervision and inspection by the Central Bank and the Securities and Exchange Commission (CVM), measures to combat money laundering and other illicit practices and penalties applied to fraudulent or reckless management of Exchanges of crypto assets.

For example, the approved text provides, among the points mentioned above, the inclusion in the Criminal Code of the crime of fraud in the provision of virtual assets services, defined as “organizing, managing, offering portfolios or intermediating operations involving virtual assets, with the aim to obtain an unlawful advantage, to the detriment of others, inducing or keeping someone in error, through artifice, ruse, or any other fraudulent means”.

The bill still needs to be approved by the Chamber of Deputies and then sent for presidential sanction. As determined by the text, after sanctioning the bill, companies operating in the financial market will have a period of 6 (six) months to adapt to the new rules.

Therefore, with the growth and innovations brought by digital assets, the need for regulation by the responsible supervisory bodies becomes unquestionable, mainly to ensure greater protection for consumers and investors. As shown above, there is a move by the United States government and the Brazilian legislative branch to guarantee these regulations and protections, given the undeniable presence of digital assets in the financial market.

Written by Clara Couto, Paralegal da Drummond Advisors