There are two key aspects to highlight in this definition. First, it only applies to entities that have a specific type of Brazilian business ID called a CNPJ (a CNPJ is similar to a business tax identification number, TIN, or employer identification number, EIN, in the US). Second, it requires that the aforementioned services be provided on behalf of a third party for the supplier to be considered a VASP. These two points mean that individuals, as well as hardware and software services such as self-custody solutions, should not fall under the rules and therefore not be identified as VASPs.
The penalties
The bill states that existing criminal penalties for fraud and money laundering should also include illegal acts involving cryptocurrency. The punishment varies from three to 10 years in prison, in addition to fees, and in some cases is more severe if virtual assets are involved.
The parts left out
Key aspects of the bill were removed from the text in the final vote. Here are some of the most important.
Patrimonial segregation
A rule added by the Senate required VASPs to keep user funds separate from equity capital. It sought to prevent problems similar to what happened to FTX, the now-bankrupt global exchange that apparently used customer funds to finance trades executed by a sister company, Alameda. In particular, this rule meant that in the event of a bankruptcy, user funds would be immediately returned instead of being part of the bankruptcy process or used to settle some of the company’s debts.
The inclusion of this section was supported by several key players in the market, as well as the BCB. Deputies voted against it in Tuesday’s session, arguing that the rule could stifle innovation in Brazil as it could pose a major barrier to entry into the cryptocurrency market.
Tax exemption on mining rigs
Another apparently positive rule that was left out of the final text sought to exempt federal taxes on the purchase of mining equipment and software such as ASIC rigs until December 2029. It included some conditions on the benefit, such as the need to use renewable energy sources. The rule could have helped promote a healthy mining market in the country, as federal import taxes alone can often double the price of some commodities shipped to Brazil.
Government agencies that maintain accounts on VASPs
A third rule that did not make it into the final text allowed government agencies to open and operate accounts with VASPs, such as stock exchanges. The possibilities for operating such accounts will be limited by those established by the executive power.
