This is the third in a series of articles on Cryptocurrencies as a disruptive technology. In the first two articles, we have seen Which Problems Have Cryptocurrencies Come to Solve and the the Analysis of The International Legal Frame
Now, let´s see the scenery and trends in Brazil.
The legality of cryptocurrencies widely varies from country to country, and it is yet to be defined, or it is changing in many other nations. While some countries explicitly allow their use and exchange, other restrict or have even banned them. Similarly, many governmental agencies, departments, and courts have classified bitcoins in different ways.
The governments in South America (except Argentina) are resistant about cryptocurrencies, and Brazil seemed do not want to interfere.
But now, Brazilian authorities and legislators understand that this new class of assets has come to stay!
Current regulatory regime and legal framework of cryptocurrencies in Brazil
The Brazilian Constitution
The Brazilian Constitution disposes of the Union as responsible for emitting currency, what is performed by the Central Bank. Also, laws point Real as the national currency, endowed with legal tender. That means that only Real owns the discharging power of the coin; such power entitles its holder the debts exemption.
From that point on, then, could Bitcoin be considered a foreign currency? No, it could not. That is because the Brazilian Constitution recognizes foreign currency only those emitted by governments of other countries.
Notwithstanding there are those who intend to classify Bitcoin as electronic money (resources stored in a device or electronic system that allows the final user to perform payment transactions), Bulletin № 25.306/2014 issued by Banco Central do Brasil (BACEN in Brazilian acronym) states that electronic currencies must make payments in national currency. That is not how Bitcoin works.
Brazil has excellent well-structured institutions, like the Federal Revenue and the Central Bank. Those agencies regulate and audit assets and similar services, such as national currency, its custody, and transactions. However, they supervise currencies issued by states, and not assets of private hybrid nature and already inspected by the users of the system themselves.
The Central Bank of Brazil
As far as banking regulation of virtual currencies is concerned, there is the BACEN Official Bulleting mentioned above, whose short and straightforward content clarifies that the number of transactions of “virtual currency” in Brazil is still meager. And, therefore, its use does not offer any risks to the National Financial System yet, especially if considering the volume of retail purchases. The same Bulletin, however, is precise in its diagnosis when it shows itself aware of the inherently private nature of this new kind of asset/service. In the public hearing on the draft bill № 2303/2015, which took place in the Chamber of Deputies on August 31, 2017, BACEN has expressly positioned itself against the regulation of the cryptocurrencies.
Federal Revenue, on its turn, in the questions and answers manual regarding the Tax Declaration 2017 (IRPF 2017), released every year, has directly treated the theme in its topic “447 — Should virtual currency be declared?” The answer is “Yes. Virtual currencies (like Bitcoins, for instance), although not considered as money, as per the terms on the current regulatory mark, they must be declared on the form “Assets and Royalties” as ‘other assets,’ once they can be comparable to a financial asset.”
The manual has also clarified the following regarding Disposal of Virtual Currencies, on the topic “607 — Is the income obtained with the allocation of ‘virtual’ currency taxable?” “Yes, the revenue achieved with the alienation of virtual currency (Bitcoins, for instance), which total alienated in a month is superior to R$ 35,000.00 are taxable by way of capital gain, to the rate of 15%. The tax collection over the income must be done until the last day of the following month from the transaction. The operations must be proven with proper and trustworthy documentation.”
Financial Activities Control Council (“COAF”)
The Financial Activities Control Council (“COAF”) (the leading governmental agency for the combat against money laundering in Brazil) positioned itself in favor of the regulation of digital money, like Bitcoin. That was at the third public hearing regarding the draft bill № 2303/2015, which took place in the Chamber of Deputies on September 17, 2017.
According to the initial proposal of Draft Law № 2303/2015, digital money would be included in the definition of payment arrangements under the regulatory responsibility of Central Bank, and inspection by COAF.
The virtual coins and the legal treatment of the new technologies intended by the Brazilian Congress — The Draft Bill № 2.303/2015
An Special Committee at Brazil’s Chamber of Deputies is currently discussing regulation about cryptocurrencies.
The Draft Bill № 2.303/2015, whose author is the Federal Deputy Mr. Aureo Ribeiro, intends to include virtual coins as well as frequent flyer programs in the definition of arrangements of payments, under the supervision of BACEN, with the explanation that a “prudential regulation” is necessary due to the risks of “monetary alternative to the drug dealing and money laundering.”
The Congressman Mr. Expedito Neto has presented a substitute report to the rapporteur’s report that intends to criminalize cryptocurrencies.
As another Congressman, Mr. Thiago Peixoto, understands that cryptocurrencies should be regulated considering also the possible benefits of these technologies to Brazil, he presented a third report’s proposal about the subject.
Since 2015, public hearings have already taken place to debate such Draft Bill.
In 2017, there were importante public hearings such as that happened on July 5, 2017 , with the presence of Fernando Ulrich, an economist specialized in Bitcoin, Marcelo Miranda, Executive Director of the Brazilian brokerage company FlowBTC, and Lázaro Jung Martins, undersecretary of Inspection of the Federal Revenue.
It is also important to mention the hearing held on August 30, 2017 , counted with the presence of the Counselor of the Department of Regulations of the Financial System of Banco Central do Brasil, Mr. Madilson Fernandes Queiroz. The attorney Ms. Helena Margarido, an expert in cryptocurrencies and blockchain; the Professor of Computer Science, Mr. João Gondim, from Universidade de Brasília; the Brazilian broker Mr., Bernardo Faria, partner-owner at Foxbit, and Ms. Taynaah Reis, co-founder of the Coin Project were also present.
On September 13, 2017, there was another important public hearing  happened with the presence of the Director of Financial Intelligence of the Financial Activities Control Council (“COAF”), of the representative of the Securities and Exchange Commission (“CVM”), and of the representative of the cryptocurrencies brokerage CoinBr.
Throughout the debates, the Brazilian public authorities referred mostly to the use of the protocol of crypto coins — in particular, of Bitcoin — as a payment system, for transferring of values, or for real investment. They focused on three points of attention arising from this technology:
a) The systemic risk — an eventual failure of the software, which may negatively affect the confidence, what is mitigated for being a free open software, which is continuously being audited and improved;
b) Market risk — for those who use bitcoin, as means of value transfer or investment, there is no guarantee over a bitcoin value once it is freely defined in the market
c) Risk of usability — there is plenty hearsay regarding users who have lost their bitcoins for not performing a backup of the passwords or for merely forgetting them. 
It is important to remember Brazil is a member of the G20 that in its last meeting held in Argentina, it has been put forward the firm july deadline for recommendations on how to regulate cryptocurrencies globally . Some conclusions can be drawn from the G20 communique:
1) The rumblings of a crackdown on cryptocurrencies are out of the picture.
2) The world’s economic leaders seemingly prefer to call cryptocurrencies “crypto-assets,” implying they see cryptos as assets and not currencies.
3) The G20 communique notably acknowledges the “technological innovation” underlying cryptocurrencies, with the potential to “improve the efficiency and inclusiveness of the financial system and the economy more broadly.”
4) The G20 members intend discuss issues about the impact of cryptocurrencies when it comes to consumer and investor protection, tax evasion, market integrity, money laundering and terrorism financing, echoing concerns regulators throughout the world have in the past expressed.
It is a fact that, before any legal elaboration, the domain of the essence and the impacts of the crypto coins in the Information Era are necessary. 
With the advent of the Web Economy, notwithstanding online commerce and the corresponding electronic payments have settled almost exclusively with the intermediation of financial institutions, the demand for “digital money” has also appeared. Not exactly the one leaving the credit card straight to the online store, but the one which brings safety and promptness to the transaction on the Internet.
When discussing the Draft Law 2303/2015, thus, one must keep in mind the idea behind the first cryptocurrency, Bitcoin (or, “web currency,” or “the Internet coin,” as some prefer), and the Blockchain technology (its decentralized architecture in a peer-to-peer network.
The cryptocurrencies and the blockchain technology as a system go way beyond a simple means of payment. That is because they came to solve something much more prominent, the problems about the current centralized method of transferring and the financial intermediation (intermediation costs, privacy, security, double spending, among others) and the obstacles related to every model based on reliance.
The dimension of the changes brought about by cryptocurrencies and its technology is still far from being wholly unveiled. The array of possible uses increases every day. As an example, we can mention the government of Switzerland that is migrating part of the real state registrations to Blockchain.  NASDAQ, the American stock exchange for technology companies, is using blockchain for negotiation and registration of assets like shares.  The Japanese government is looking for integrating blockchain to its online bidding system.  Banco Central do Brasil has recently released a research document  that details possible cases of use for blockchain and distributed ledgers, while describes how several available platforms could be used to testing the technology.
That is why it is reckless a legal proposal that intends to regulate the market of cryptocurrencies with the same measures (and weight) applied to the market of credit cards. 
In September, the Chinese government, the People’s Bank of China (PBoC) and the local financial regulators imposed a national prohibition in exchanges of crypto coins. 
This intolerant posture, however, has not resulted in the effect expected by the Chinese authorities. The global exchange market of cryptocurrencies has restructured itself while the majority of the volumes negotiated in China has moved to neighbor markets, such as Japan and South Korea, which supplies an efficient and well-regulated ecosystem for the Chinese traders. Not mentioning the increase of negotiation volumes of Over-the-Counter markets (OTC), and peer-to-peer negotiation platforms (P2P). Now, the Chinese marketers negotiate cryptocurrencies and exchange the Chinese Yuan without the control and involvement of the Chinese authorities. 
As we can draw out of this Chinese case, the elaboration of a new regulation of technologies still in construction applying inappropriate legal frameworks to them has indeed proven itself ineffective.
Matters related to the application of existing legal frameworks will undoubtedly have to be reviewed in the future for, who knows, replace the current one.
The current legislation, however, already encompasses many situations impacted by new technologies and they seem to be enough, for now, to regulate new matters arising with the cryptocurrencies.
We are facing a very new market that is in constant transformation. Therefore, the best thing to do at the moment is to observe, invest in research , and while doing so, apply the existing judicial rules, as well noted by the representative of the Banco Central do Brasil in the second Public Hearing about the Project № 2303/2015.
 Available at: https://www.youtube.com/watch?v=2GxaPkoHNv4&sns=em. Last seen on October 2, 2017.
 Available at: https://www.youtube.com/watch?v=TKI44URYKYM&sns=em. Last seen on Last seen on October 2, 2017.
 Available at: https://www.youtube.com/watch?v=VD7vhr6UEmI&sns=em. Last seen on October 2, 2017.
 Ulrich, Fernando. In: “Discurso proferido em Brasília, na Audiência pública de 5/7/2017” Available at: https://www.youtube.com/watch?v=2GxaPkoHNv4&feature=youtu.be. Last seen on October 6, 2017.
 The G20 Communiqué. In: Communiqué Annex Finance Ministers & Central Bank Governors. March 19–20, 2018. Buenos Aires, Argentina Available at: http://www.g20.utoronto.ca/2018/2018-03-30-g20_finance_annex-en.pdf. Last seen on March 27, 2018.
 Revoredo, Tatiana. In: Digitalization Of Society: The Internet Economy (Their Impacts end Effects in the Current Society). Breathe Publication. Available at: https://medium.com/breathe-publication/digitalization-of-society-the-internet-economy-12ad265d9664. Article published in the website Medium, on October 5, 2017. Last seen on October 10, 2017
 Lantmäteriet (The Swedish Mapping, cadastre and land registration authority), Telia Company, ChromaWay and Kairos Future. In: The Land Registry in the blockchain. Available at: http://ica-it.org/pdf/Blockchain_Landregistry_Report.pdf.
 Groenfeldt, Tom. In: Blockchain Moves Ahead With Nasdaq-Citi Platform, Hyperledger and Ethereum Growth. Forbes, 2017. Available at: https://www.forbes.com/sites/tomgroenfeldt/2017/05/22/blockchain-moves-ahead-with-nasdaq-citi-platform-hyperledger-and-ethereum-growth/#6b391fb7333d. Article published in the Tech section of the website Forbes, on May 22, 2017.
 Nikkei Asian Review, In Japan looks to blockchains for more secure e-government systems. Available at: https://asia.nikkei.com/Politics-Economy/Policy-Politics/Japan-looks-to-blockchains-for-more-secure-e-government-systems. Last seen on October 10, 2017.
 IT department team of Central Bank of Brazil, in: “Distributed Ledger technical research in Central Bank of Brazil,” available at http://www.bcb.gov.br/htms/public/microcredito/Distributed_ledger_technical_research_in_Central_Bank_of_Brazil.pdf . Last seen on October 6, 2017.
 Margarido, Helena. In: Regime Jurídico das Moedas Digitais no Brasil, 2017. Available at: http://politica.estadao.com.br/blogs/fausto-macedo/regime-juridico-das-moedas-digitais-no-brasil/. Last seen on October 6, 2017.
 BBC. In: China orders Bitcoin exchanges in the capital city to close. Article published in the Business section of the website BBC News, on September 19, 2017. Available at: http://www.bbc.com/news/business-41320568. Last seen on October 10, 2017.
 In fact, only two out of 10 of the most significant bitcoin exchanges by volume (which represent 52% of the total global amount), are Chinese… representing around 9% of the total global volume. To understand the Chinese cryptocurrencies market better, check Churchouse, Tama. In: China’s crackdown won’t kill cryptocurrencies — but it will have an impact. Article published in the Markets section of the website Business Insider, on September 16, 2017. Available at: http://www.businessinsider.com/bitcoin-price-chinas-crackdown-wont-kill-cryptocurrencies-2017-9. Last seen on October 11, 2017.
 It is worth mentioning here the recent study carried at The Cambridge Centre for Alternative Finance, by Judge Business School of the University of Cambridge, with the title “Global Cryptocurrency Benchmarking Study.” That is an initial research focused on alternative payment systems and digital assets. Led by Dr. Garrick Hileman, it is the first study of its kind to holistically examine the burgeoning global cryptocurrency industry and its key constituents, which include exchanges, wallets, payments, and mining. Available at https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2017-global-cryptocurrency-benchmarking-study.pdf.
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