On November 16, 2017 the Central Bank of Brazil (Banco Central do Brasil – Bacen) issued Communiqué No. 31,379, warning about the risks of operations of custody and trading of the so-called "virtual currencies"1. The content of this warning is outlined herein.
Considering the growing interest of the economic agents (the society and the institutions) on this matter, Bacen decided to warn that the virtual currencies are not issued or guaranteed by any monetary authority. Therefore, they have no conversion warranty for sovereign coins and neither are they backed by real assets of any kind. All the risk gets with the holders. Its value derives exclusively from the confidence conferred by the individuals to the issuer of the virtual currency.
The purchase and custody of the virtual currencies with speculative purpose are subject to imponderable risks, including the possibility of loss of the entire capital invested, in addition to the typical variation of price. The storage of virtual currencies also presents the risk that the holder of these assets may suffer pecuniary losses.
If used in illicit activities, the virtual currencies could expose the holders to investigations conducted by the public authorities in order to ascertain the criminal and administrative responsibilities arising out of such activities.
The companies which trade or guard virtual currencies on behalf of the users (individuals or legal entities) are not regulated, authorized or overseen by Bacen. In the legal and regulatory framework related to the Brazilian Financial System, there is no specific provision about virtual currencies. Bacen does not regulate or supervise operations with virtual currencies.
The virtual currency should not be confused with the electronic currency as defined by Law No. 12,865, of October 9, 2013, and the applicable rules contained in the normative acts published by Bacen in accordance with the guidelines of the Brazilian Monetary Council (Conselho Monetário Nacional – CMN). Pursuant to this definition the electronic currency is deemed to be the resources in Brazilian currency (the Real) stored in an electronic device or system that allow the end user to perform payment transactions. Electronic currency, therefore, is a way of expression of credits denominated in reais. Virtual currencies, on its turn, are not referenced in reais or in any other currencies established by sovereign governments.
The operations with virtual currencies and other related instruments involving international transfers referenced in foreign currencies are also subject to the compliance with the applicable exchange regulations. In particular these transactions must be carried out exclusively through institutions duly authorized by Bacen to operate in the exchange market.
Although the virtual currencies have been subject to international debate and manifestation of the monetary authorities and other public authorities, the international agencies have not identified to date the need to regulate these assets. In Brazil, for the time being, they do not represent relevant risks to the Brazilian Financial System. However, Bacen remains attentive to the evolution of the use of the virtual currencies, as well as it follows the discussions on this subject in the international fora for the purpose of adopting eventual measures, if any, observing the attributions of the competent bodies and entities.
Finally, Bacen affirms its commitment to support financial innovations, including those based on new technologies to make the financial system safer and more efficient.
1. The "virtual currencies" or "cryptographic coins" are digital representations of value that are not issued by any Central Bank or other monetary authority. Their value stems from the trust placed in its operating rules and in the participants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.