Brazil crypto law back on agenda as FTX collapse sends shockwaves

This is because unregulated digital currencies are now much more of a problem as a result of FTX's demise.

Following the fall of FTX, formerly the darling of the industry, Brazilian crypto enthusiasts are pleading with lawmakers to approve a bill intended to strengthen oversight of the sector. This is because unregulated digital currencies are now much more of a problem as a result of FTX's demise.

The regulation had been "sort of inactive" during the election season, according to Roberto Dagnoni, a key executive at SoftBank-backed exchange Mercado Bitcoin, but it now needed to be a priority.

If the FTX debacle has a silver lining, it is that the law is now given priority, he told Reuters on Tuesday. Some players have been exempt from the current restrictions, thus they are free to act whatever they like. Much would change if this bill passed.

The bill, which was approved by the senate earlier this year and is now awaiting action by the lower chamber, would require all locally active cryptocurrency providers to have a physical presence in the nation and require the disclosure of any suspicions of money laundering and other criminal activity. For violations, the text lists fines and possibly jail.

According to research from 2022 Chainalysis, Brazil is one of the top 10 most active markets worldwide for cryptocurrencies.

The previous leader of the nation's blockchain association, Fernando Furlan, expressed hope that the FTX scandal would be "a push enough" to approve the law.

Furlan continued, saying that while though the law's stricter reporting requirements may make it more difficult for smaller organizations and so-called "dot com" crypto exchanges to function, this was a worthwhile trade-off.

It's a terrific regulation, he continued, "if it benefits Brazilian investors."

The measure might be passed faster than originally anticipated.

Lower House Speaker Arthur Lira was quoted by the newspaper Folha de So Paulo as indicating last week that the house was prepared to vote on the measure before the year ended.

In a public panel, the head of Brazil's securities regulator said that "it is vital that we start having laws" for cryptocurrencies and that the legislation "is very close."

However, given the 2023 financial concerns that have gained precedence since Luiz Inacio Lula da Silva's electoral victory, some important players doubt the bill would be passed so swiftly.

FTX declared bankruptcy last week and is being investigated by American authorities amid claims that $10 billion in customer assets were transferred from the cryptocurrency exchange to FTX founder Sam Bankman-trading Fried's firm Alameda Research. Lira did not immediately respond to a request for comment.

In Latin America, FTX did not have a major presence.

Mercado Bitcoin, which is mostly operating in Brazil and Portugal, has no exposure to FTX, according to Dagnoni, who also noted that the company has created its own custody solution to store customer assets.

In spite of widespread withdrawals, he continued, his exchange had even had "net positive" volume flows.

He stated, "I think people are distinguishing between the asset and poor management.