On December 22nd, 2022, the Brazilian Federal Law No. 14,478/2022 was published, providing guidelines to be observed for provision of services involving virtual assets.
Article 3 of Law No. 14,478/2022 defines virtual asset as the “digital representation of an asset that can be traded or transferred by electronic means and for making payments or for the purpose of investment.” The numeral items of the law also determine that the following assets can not be considered to be virtual assets: (i) domestic or foreign currency; (ii) the electronic currency referred to in the Brazilian Federal Law No. 12,865/2013 (“resources stored in an electronic device or system that permits the end user to carry out payment transactions”); (iii) instruments that provide to their owners new products or benefits (e.g., points, rewards or loyalty programs); and (iv) representations of assets whose issuance, booking, trading or settlement is set forth in a law or regulation (e.g., securities or other financial assets).
Likewise, Article 5 of Law No. 14,478/2022 defines “virtual asset service providers” as legal entities that carry out, on behalf of third parties, at least one of the following services involving virtual assets: (i) exchange between virtual assets and national or foreign currency; (ii) exchange between multiple virtual assets; (iii) transfer of virtual assets; (iv) custody or management of virtual assets or instruments that enable control over virtual assets; or (v) participation in financial services and provision of services related to the offer by an issuer or sale of virtual assets.
According to Law No. 14,478/2022, the functioning of virtual asset service providers will depend on prior authorization of a body or entity of the federal government, which will be defined by an act of the executive power.
The competence of the referred body or entity will cover the granting of authorization for the functioning and possible corporate transactions of service providers (e.g., transfer of control, merger and amalgamation), imposition of conditions for the exercise of positions in the referred companies, supervision of activities, and application of penalties among others. That body or entity will establish the conditions and time frames, not shorter than 6 months, for virtual asset service providers that are already active to adjust themselves to Law No. 14,478/2022.
Finally, Law No. 14,478/2022 has altered the Brazilian Criminal Code to classify crimes of fraud involving the use of virtual assets, securities or other financial assets. In this respect, it shall be deemed a crime to “organize, manage, offer or distribute portfolios or intermediate in transactions that involve virtual assets, securities or financial assets for the purpose of obtaining an illicit advantage, in detriment to other parties, by inducing error or misleading such parties through artifice, ruse or other fraudulent means.” The commission of such crimes is punishable by imprisonment for 4 to 8 years and a fine.
Law No. 14,478/2022 will take effect 180 days after its publication (i.e., on June 20th, 2023).
More information, as well as the full text of Law No. 14,478/2022, can be found at the “Planalto” portal of the website of the Brazilian Federal Government (www.gov.br/planalto).
