The bitcoin will never be used to buy coffee at the corner of your house or the bread at the bakery. In other words, as means of payment. In this sense, the bitcoin should not be used as currency. This is the view of the CEO of Transfero Swiss AG, Thiago César, who attended last Wednesday (July 3rd) in Rio de Janeiro the debate Cryptocurrencies –Financial, Tax and Regulatory Aspects. The meeting was sponsored by the law firm Carvalho, Machado and Timm Lawyers.
Bitcoin will not be used as currency, but it’s a store of value
According to the CEO, the bitcoin is essentially a store of value and means of international payment transfers with low cost. “You have an asset that, by its own characteristics, tends to appreciate, so you will not want to trade it for an asset that will depreciate”, he said during the discussion panel.
As it is counter-cyclical and not inflationary, the currency is sought by countries with severe financial instability as Venezuela. Moreover, it can also be used as protection against international crises or political events that may bring some instability, as recently with the Brexit case. In the future, analyzes Thiago César, central banks may hold bitcoins as a counter-cyclical asset for these purposes.
Brazilian regulation aimed at financial market scares off investors
Thiago also mentioned that the Brazilian regulation for financial market does not protect the investor, but scares him off. He exemplified saying that the regulated market, as the stocks market, have less people than a new and unregulated market, such as crypto. This is the result of excessive regulation, he said.
The business opportunities that exist with the cryptocurrencies are in many cases the result of the deficiencies and flaws in the international financial integration. He mentioned the Exchange and arbitration as some of these businesses.
He also stressed that pyramid schemes that used bitcoins to spread out can bring strict and heavy rules to this market imposed by the regulator. “We had bad examples of pyramids before the bitcoin. Brazilians like pyramid, it´s a cultural thing. Generally, the person who is asked about pyramid is already in the third or fourth scheme and lost money in all of them,”he said.
Thiago also talked about international examples of crypto-friendly regulation. For instance, Montenegro, neighbouring country to Serbia and Bosnia has a quite friendly policy to companies that want to do business with cryptocurrencies. Through a simple query, these companies just advise the desire to develop the activity and are placed in a regulatory sandbox, with flat tax (regardless of the turnover) of 9%.
Legal and tax aspects of cryptocurrences are hazy in Brazil
The partner at Carvalho, Machado and Timm, Rodrigo Dufloth, commented on the legal and tax aspects of the cryptocurrencies. According to him, Brazil does not consider the bitcoin as a security or financial asset, so in theory neither the Central Bank nor the Brazilian Securities Commission (CVM) supervises the activities involving the cryptocurrency. As it doesn´t have a clear regulation, usually the businesses related to these assets are based by other regulations of the Civil law, etc.
“In the first semester of Law school, you learn that everything not prohibited by law is allowed. However in Brazil there is a culture among businessmen that it is necessary to wait for a legal rule or standard so that they can feel secure. As a lawyer, I understand this because even if you have the law, there is questioning in the courts “, ponders Dufloth.
Fabiane Verçosa, also a member of the law firm, warned about the necessity of constant monitoring of the activities with cryptocurrencies. She cited the use of bitcoins for international remittances, which depending on the case, and if it´s not declared, can constitute tax evasion.
Uncertainties in the tax area set exchanges activities
Another partner of the firm, Cristiano Carvalho, focused on the challenge of the exchanges in the tax area. Today there is no law which determines taxes collection on the activities of these companies. “There’s no tax if there is no explicit law that creates it,” said the lawyer.
However, there are discussions about ICMS and ISS charges on these activities. “In the case of exchanges, the closest resembling tax is the ISS. The list of activities is decisive but also extensive. Therefore, some towns may want to peg the activity of data storage and processing, for example.
Carvalho praised the Provisory Act of Economic Freedom, which, among other issues, changed various laws that affect small businesses and startups. Although the rules are already in force, the act still needs to be converted into law. According to Carvalho, the version that should come out of Congress is even more liberalizing than the Provisory Act.
Willian Yoshihiro, partner at Plural Brazil Bank, commented that there are several exchanges and arbiters of cryptocurrencies among thebanks´s clients. And the Bank adopts compliance policies to know the origin and the destination of the resources that pass through it.