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  • 21 December 2023

Central Bank of Brazil publishes Public Consultation on regulation of the virtual assets market

The Law No. 14,478, published on December 21, 2022 (“Law 14,478”), established the regulatory framework for the virtual asset market in Brazil and guidelines for the operation of virtual asset service providers. Article 6 of Law 14,478 provides that an act of the Federal Executive Branch will assign to one or more bodies or entities of the Federal Executive Branch the discipline of the operation and supervision of virtual asset service providers. Therefore, on June 14, 2023, the Federal Executive Branch enacted Decree No. 11,563 (“Decree 11,563”), which appoints the Central Bank of Brazil (“CBB”) as the regulatory authority responsible for regulating the operation of virtual asset service providers and supervising service providers in the segment.

So as expected, the CBB published Public Consultation No. 97, of December 14, 2023[1]  (“Public Consultation No. 97”), in the form of a public hearing, with the aim of obtaining contributions and information for the CBB’s drafting of regulations concerning the virtual assets referred to in Law 14,478.

The purpose of Public Consultation No. 97 is to receive suggestions and comments from professionals and civil society in general before the CBB implements regulations on the virtual assets market. The initiative represents another step by the CBB towards the implementation in Brazil of concrete regulations for the virtual asset market and virtual asset service providers.

Main Contributions Requested through Public Consultation No. 97

Considering that the purpose of the public consultation is to support the regulator’s decision-making process and the issuing of public administration rules, while seeking to meet the wishes and suggestions of the public, providing ways to receive contributions from civil society in general, the CBB expects to receive substantiated contributions specifically on the following aspects:

  • mechanisms for the adequate asset segregation between the assets of customers and the assets of the virtual asset service providers themselves, as well as instruments for mitigating the risks arising from the eventual dissolution of the entity;
  • process of obtaining a license to operate virtual assets service providers, whether they intend to request authorization for several activities or a specific one, and whether it will be aligned with the processes already in place for other regulated entities and under the supervision of the CBB, or whether it should be linked to a specific type of regulated entity;
  • aspects of the custody of customers’ virtual assets with custody service providers established abroad, as well as the mitigation of risks in relation to contracting third-party services;
  • mechanisms for identifying and restraining attempts at market manipulation and fraudulent practices, rules for assessing risks related to money laundering and the need to have a minimum organizational structure to ensure adherence to current legislation and regulations, systems for processing and controlling operations, as well as information security;
  • the importance of cyber security for the proper functioning of virtual asset service providers;
  • the need to provide information to customers; and
  • rules for adapting virtual asset service providers to the applicable standards and difficulties, in terms of the transition that culminates in effective authorization by the CBB, both for virtual service providers and for other entities that support them in the virtual asset segment.

Interested parties can make contributions until January 31, 2024, and can send suggestions and comments through the channels provided in the document itself, noting that the CBB has made it open for interested parties to send other elements that were not addressed in the notice but that should be considered by them in the regulation of the virtual assets market.

[1] Available on https://www3.bcb.gov.br/audpub/DetalharAudienciaPage?5&audienciaId=581

Our office has a team specialized in Banking Law. For clarification on this subject, or others that might be of interest, please contact our professionals.

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