Brazilian cryptocurrency advocates are urging lawmakers to finally approve a bill to strengthen oversight of the sector after the collapse of FTX, a once-popular cryptocurrency industry, sparked new concerns about unregulated digital currencies.
Roberto Dagnoni, an executive at Mercado Bitcoin, the SoftBank-backed exchange, said the law had been "a little dormant" during the election period but must be a priority now.
Law prioritized," he told Reuters on Tuesday. "The current rules didn't apply to some players, so they can do whatever they want... This (law) would change a lot."
The bill, passed by the Senate earlier this year and now awaiting approval from the House of Commons, would require all local cryptocurrency providers to have a physical entity in the country and disclose suspicions of money laundering and other criminal activity .
The text provides for fines and even imprisonment for violations. Brazil is one of the ten most active cryptocurrency markets in the world, according to Chainalysis data from 2022. Fernando Furlan, former president of the country's blockchain association, also said he hoped the FTX saga was "impetus enough" for the law to pass. Furlan added that while the law may make it harder for so-called "dot-com" crypto exchanges and smaller groups to operate due to higher reporting standards, it's a healthy trade-off.
"If it's good for Brazilian investors, then it's a good law," he added. The law could be passed sooner than expected. Last week, the Folha de S. Paulo newspaper quoted the Speaker of the House of Commons, Arthur Lira, as saying the chamber was ready to vote on the law before the end of the year. The president of Brazil's securities regulator told a public panel that "it's important that we start having rules" in crypto and that the bill is "very close".
However, some key players are skeptical that the law will be passed so quickly given the problems with the 2023 budget, which are taking precedence after Luiz Inacio Lula da Silva's victory in the presidential election. Lira did not immediately respond to a request for comment.
FTX filed for bankruptcy last week and faces an investigation by US authorities amid reports that $10 billion in client assets were transferred from the crypto exchange to FTX founder Sam Bankman's trading firm. Fried, Alameda Research. FTX did not have a large presence in Latin America.
Dagnoni told Reuters that Mercado Bitcoin, which is mainly active in Brazil and Portugal, had no exposure to FTX as it had developed its own custodial solution to store client assets.
He added that his exchange has even seen "net positive" volume flows despite massive withdrawals worldwide. "I think people separate wealth from mismanagement," he said.
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