FTX Collapse Urges Brazil to Seek Crypto Regulations
FTX, one of the most prominent crypto exchanges, collapsed and filed for bankruptcy on 11. November 2022, following a spike in customer withdrawals earlier that month. Needless to say, the FTX collapse shook the already volatile crypto market, resulting in a multi-billion-dollar loss.
FTX went down after failing to meet a run on deposits that left an $8 billion hole in the company’s books. It only took one week after this incident for the exchange to ultimately file for bankruptcy.
To make matters worse, Reuters reported that Sam Bankman-Fried, the FTX founder, secretly transferred $10 billion of customer funds from FTX to its trading company.
But the guy claims he didn’t even try to commit fraud, and that counts for something, right?
Nevertheless, this sequence of events shook the market to the core.
Photo illustration: Freepik
The digital asset market and crypto owners might take months to recover from this shockwave. And while 2022 overall wasn’t a good year for crypto, the beginning of December brings some big and exciting news that shows we’re headed in a good direction.
Brazil’s Congress just passed a bill that would regulate crypto payments. The bill’s author was federal deputy Aureo Ribeiro, and it proposes a setup of a committee that will monitor and control crypto activity within the country.
Crypto Payments Aren’t Legal Yet- President’s Signature Is Still Required
The bill was first approved in April 2022. Still, that was just the first step, as the bill required additional approval to become law.
If you’re wondering what approvals I’m referring to, the bill still requires the Brazilian president’s signature, since the Congress already gave the green light. If Jair Bolsonaro, the outgoing president of Brazil, approves this bill, crypto payments would officially become legal in this crypto-friendly country.
It’s speculated that the Brazil Congress passed the bill as the FTX collapse confirmed how shaky and unstable the crypto market is. The bill will grant Brazil the power to execute laws regarding crypto assets. This will allow them to prevent fraudulent activities, such as those at FTX, from occurring within the country.
As stated earlier, the president and his Cabinet must also determine which regulatory body will supervise crypto payments. The decision will be made after the bill is signed into law.
According to AIBC, the Central Bank of Brazil (BCB) and the country’s Securities and Exchange Commission (CVM) might join hands to make it happen. Apparently, BCB will have to regulate BTC payments, While CVM’s duty will be to handle the investment proportion.
Bank Indonesia has already launched the design for its digital currency and joined other banks that already have their coins available to the public to homogenize CBDCs (digital currency available to the general public that only a country's central bank can produce).
According to the Verge, Perry Warjiyo confirmed that Indonesia’s digital currency would use a platform that will be compatible with other CBDCs. In other words, Indonesia’s digital currency will be interoperable and interconnected with other central bank digital currencies.
The Verge also reports that central banks will agree on the exchange rate for digital currencies. On top of that, Bank Indonesia will introduce the digital rupiah gradually, starting with wholesale CBDC and a business model of the digital rupiah for financial operations. After completing these steps, Bank Indonesia will introduce its digital currency for everyday use.
How Will the Bill Affect Crypto Owners?
For starters, approving the bill for the regulation of crypto payments will allow financial institutions, such as banks, to offer crypto payment services. Of course, this doesn’t mean the banks in Brazil will be obligated to include these services in their offerings. However, passing the bill will open doors to customer expansion and standardization of crypto payments, allowing banks to tap into the crypto market.
Photo illustration: Freepik
More importantly, as crypto payments become available, crypto owners will finally get a chance to use their digital assets daily. That said, crypto payments will offer a convenience only a few people get to enjoy.
In countries where crypto payments aren’t accepted, users must sell their assets and transfer that money to their bank account (which could take up to a few days) before they even get a chance to use them, not to mention the amount of money wasted on the platform and transfer fees. And while paying with crypto will undoubtedly involve some fees, it would still be a cheaper and more convenient option.
The bill is significant because it would make crypto payments legal in Brazil. However, it would not give them the status of legal tender.
Even if everything goes according to plan, Brazilians won’t use crypto as a satisfactory form of payment for monetary debts. In other words, Brazilians won’t be able to pay off their loans or other obligations with crypto. But they could still pay for goods and services with these digital assets.
It’s also worth noting that crypto firms will most likely need to acquire the “virtual service provider” license. The license will allow them to operate freely in Brazil. If that happens, crypto firms currently working in this country will get 180 days to acquire the permit. If they refuse, they will have to abandon their affairs in Brazil entirely.