ABcripto proposes adjustments to Central Bank regulations to ensure legal security and competitiveness in the crypto market

The Brazilian Association of Cryptoeconomics (ABcripto) submitted its contributions on February 28th to the Central Bank of Brazil’s (Bacen) Public Consultations 109/2024, 110/2024, and 111/2024, which establish the framework for regulating virtual asset service providers (VASPs). The association evaluates the proposals positively but suggests adjustments to strengthen legal certainty, ensure investor protection, and preserve Brazil’s competitiveness in the global scenario. 

For Bernardo Srur, CEO of ABcripto, sector regulation must balance innovation and consumer protection without imposing excessive restrictions on companies. “Regulatory progress is essential to provide market predictability and encourage long-term investments. Our priority is to ensure rules that guarantee customer security, promote innovation, and position Brazil as a competitive environment for digital businesses. The Central Bank has conducted an open and technical dialogue, and we remain committed to contributing to a modern and efficient regulatory framework,” says Srur. ABcripto’s contributions were collaboratively developed by its members, led by the Central Bank Working Group and the Taxation, Exchange, and Stablecoins Working Group, and include suggestions to improve sector regulation.  

The full contributions are available on ABcripto’s website 

Check out ABcripto’s main contributions to the Central Bank 

Public Consultation 109/2024 – Regulation of VASPs 

• Asset segregation and risk management:Ensuring separation between VASPs’ assets and client assets is essential for market security. ABcripto has historically advocated for this practice and proposed improvements to the requirements.
• Preservation of confidentiality and information security:Strengthening data protection standards is crucial to ensure that financial and personal information of clients and companies is safeguarded against unauthorized access and cyber threats.
• Clear definition of VASP types:The regulatory proposal establishes distinct categories for different sector agents, such as liquidity providers, intermediaries, custodians, and brokers, ensuring appropriate rules for each operational model and avoiding disproportionate requirements.
• National market competitiveness and regulatory balance:Regulations must be compatible with international best practices and regulatory equivalents to ensure companies maintain sustainable development, preserving dynamism and innovation while reducing the possibility of regulatory arbitrage, without adding unnecessary controls that could compromise sector competitiveness and integration with international markets.
• Review of regulatory interconnection between different regulators:Clear delineation of regulators’ roles is essential to avoid overlaps and interdependencies that could result in regulatory gaps, legal uncertainty, and delays, ensuring a more predictable and efficient business environment.
• Adequate timeframe for regulatory compliance:A well-structured transition period allows VASPs to make necessary adjustments without compromising their operations, ensuring progressive adaptation to new requirements.

Public Consultation 110/2024 – Authorization Processes for VASP Operations 

• Efficient licensing process:Creating an agile authorization flow proportional to company size favors sector innovation.
• Governance and compliance:Aligning governance requirements with financial market best practices is essential to ensure transparency, operational robustness, and efficient accountability mechanisms.
• Structured regulatory transition:Regulation must be implemented gradually, allowing VASPs to adjust their internal processes and operational structure without negative impacts on the market and investors.
• Flexibility for companies of different sizes:Regulation should consider the size and complexity of VASPs’ operations, ensuring regulatory requirements are proportional to their scale of operations.

Public Consultation 111/2024 – Foreign Exchange Rules for Virtual Assets 

• Differentiation between foreign exchange operations and virtual asset transactions:Stablecoins and other digital assets have unique characteristics that must be considered to avoid automatic equivalence with traditional foreign exchange operations, preventing sector distortions.
• Avoid barriers to the international market:Regulation should allow Brazilian companies to operate globally without restrictions that could compromise their competitiveness and innovation in the digital asset sector.
• Self-custody and money laundering prevention:A balance between preventing illicit activities and VASPs’ operational viability must be maintained, ensuring self-custody remains viable and controls for different types of illicit activity prevention can be incorporated safely and efficiently.
• Clarification of stablecoins’ role:Differentiation between types of stablecoins and their respective market functions should be incorporated into regulation, avoiding generic restrictions that could limit their use.
• Adaptation to market dynamics:The regulatory model should consider the specifics of decentralization, technological innovation, and sector globalization, ensuring rules are appropriate to the sector’s reality.
• National market competitiveness and integration with the global market:Reviewing obligations that impact the national market is essential to preserve market liquidity and ensure regulation does not invalidate business models already consolidated in the global cryptoasset scenario.
• Ongoing collaboration with the Central Bank:ABcripto reaffirms its commitment to work alongside the regulator to build a balanced, efficient regulatory framework aimed at the sustainable growth of cryptoeconomics in Brazil.