Brazil’s Congress to weigh Bitcoin Reserve as hedge against global risks

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As a seasoned researcher with a keen interest in digital currencies and their potential impact on global economies, I find the proposed bill to establish a Sovereign Federal Bitcoin Reserve in Brazil intriguing. Having closely observed El Salvador’s foray into Bitcoin as legal tender and its subsequent implications, I can see how such a move could potentially reshape Brazil’s financial landscape.

A new plan for a law in Brazil’s legislature suggests creating a Federal Bitcoin Reserve operated by the government, which could significantly alter how the nation manages and regards digital currencies.

On November 25, Congressman Eros Biondini presented a proposal aiming to establish a special reserve called RESBit – the Sovereign Strategic Bitcoin Reserve.

As per the law, a Bitcoin (BTC) reserve might provide protection to the nation’s national reserve by minimizing the impact of currency volatility and geopolitical risks. Furthermore, this reserve could act as security for the upcoming central bank digital currency, known as Real Digital (Drex).

A sovereign reserve refers to a collection of resources, usually financial assets, that are managed by a nation’s central bank. These assets are often employed to support the value of the country’s paper currency, maintain economic stability, and facilitate international trade. As of December 2023, Brazil had accumulated approximately $355 billion in reserves, with a significant portion of these funds tied to global currencies like the US dollar.

According to the suggested law, the nation’s Bitcoin reserve will serve as an additional financial resource, not exceeding 5% of the total reserves. This expansion will be gradual, accomplished through strategic purchases over time. The country’s central bank will continue to control these assets using advanced systems that incorporate blockchain and artificial intelligence technologies. A technical advisory committee made up of security experts will provide support to ensure the safety and efficiency of these systems.

The bill refers to El Salvador’s move into Bitcoin as an example of progress. The Central American country made Bitcoin a legal tender in 2021 alongside the US dollar, seeking to enhance financial inclusion and encourage foreign investment.

From that point forward, the government of El Salvador has been consistently purchasing Bitcoin. As of November 26, they own approximately 6,000 Bitcoins, which equate to around $542 million in value.

Based on the proposed legislation recently presented in Brazil, Bitcoin appears to have aided El Salvador in broadening its economic structure over the last four years.

This legislation additionally outlines consequences for instances where the RESBit is not followed properly or managed poorly. It specifies that those who break these rules may be subject to either administrative penalties or legal repercussions.

Currently being examined by the Speaker of Brazil’s House of Representatives, this legislation is set to be sent to various committees for discussion once approved.

2023 saw Brazil moving forward with regulations for digital assets, with the implementation in June of a legal structure that empowers its central bank to manage and supervise providers of virtual asset services. Moreover, any tokens classified as securities remain under the jurisdiction of the country’s Securities and Exchange Commission.

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2024-11-27 00:32