Brazil’s Lower House Passed a Crypto Framework but Left Custody Protection Unresolved

Brazil’s Chamber of Deputies approved the final congressional version of Bill 4401/2021 on November 29, 2022, sending a national framework for virtual-asset service providers to President Jair Bolsonaro for consideration.

The vote mattered because it placed exchanges, custodians and other covered intermediaries on a path toward federal authorization and supervision. It also arrived during heightened scrutiny of centralized crypto businesses following FTX’s November 2022 collapse. Yet the approved bill was a framework rather than an operating rulebook, and lawmakers left a major custody question unresolved: the final text did not expressly require providers to segregate customer assets from their own property.

Defining the regulatory perimeter

The bill defined a virtual asset as a digital representation of value that could be traded or transferred electronically and used for payments or investment. It excluded sovereign currencies, electronic money already governed by payments legislation, loyalty-program benefits and assets already subject to another legal or regulatory regime, including securities.

Covered services included exchanges between virtual assets and national or foreign currency, exchanges among virtual assets, transfers, custody or administration, and participation in financial services connected with an issuer’s offer or sale. That language addressed intermediaries acting for third parties; it did not make bitcoin or another cryptocurrency legal tender.

A federal body designated by the executive branch would authorize and supervise covered providers, approve specified changes of control and establish operating conditions. Because the bill originated in Congress, the approved text did not name the Central Bank of Brazil as that regulator. Existing providers would receive an adjustment period of at least six months under future implementing rules.

This distinction was institutionally important. Approval on November 29 did not confer a license on any exchange, activate supervisory examinations or settle how capital, governance and custody standards would work. Those details still depended on presidential approval, designation of a regulator and subsequent rulemaking.

Customer-asset segregation remained absent

The Chamber accepted much of the version previously amended by the Senate but did not retain the Senate’s proposed customer-asset segregation language. During the November 29 session, lawmakers rejected a PSDB amendment that sought to restore a provision separating a service provider’s property from the virtual assets held for customers.

That rejection narrowed what the legislation could establish about insolvency protection. The bill included consumer protection among its governing principles, but a broad principle was not equivalent to an explicit statutory rule keeping customer holdings outside a provider’s own estate or preventing their use to satisfy company obligations.

The omission was especially consequential in the post-FTX setting, when the treatment of assets entrusted to centralized platforms had become an immediate institutional concern. It would nevertheless be inaccurate to infer from the vote that every Brazilian provider commingled assets or that customers had no protections under other laws. The verified point is narrower: this bill’s final congressional text contained no express segregation mandate.

Authorization and financial-crime provisions

The framework directed the future regulator to apply principles including free competition, transparent operations, sound governance, information security, personal-data protection, consumer protection and risk-based controls against money laundering and terrorist financing.

It also added a specific fraud offense for deceptive schemes involving virtual assets, securities or other financial assets, carrying imprisonment of four to eight years plus a fine. Virtual-asset service providers would enter relevant provisions of Brazil’s anti-money-laundering system and would have to retain transaction records for reporting to supervisory and law-enforcement bodies.

These provisions made the November 29 vote more than symbolic recognition of cryptocurrency. Congress had approved a legal perimeter for service providers and financial-crime enforcement, while leaving licensing details and customer-asset treatment to future policy.

Later context

Bolsonaro sanctioned the framework on December 21, 2022, and Law No. 14,478 was published on December 22 with a 180-day delayed-effect clause. Those later steps completed enactment but were not settled outcomes on November 29.