Brazil's Operação Lava Jato Paves The Way To Blockchain Implementation: Expert Take

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Expert Takes cover everything from Blockchain technology and ICO funding to taxation, regulation, and cryptocurrency adoption by different sectors of the economy.

On April 7, the former 35th President of Brazil Lula da Silva, was the nation's first president ever to be jailed, for charges stemming from Brazil's Operação Lava Jato corruption investigation.

Luíz Henrique Casemiro, superintendent of the Internal Revenue Service in Rio, said "This was the first-time cryptocurrencies were used in such an operation to fly below the radar of the Central Bank and the IRS.".

Brazil's Central Bank governor, Ilan Goldfajn explained that cryptocurrencies are not "Electronic currency" under Brazilian law as "Cryptocurrencies lack the stability needed to be a safe and legitimate exchange of value." He prefers to think of them as "Crypto-assets" along with the rest of the G20. Goldfajn serves as a Director of the Bank for International Settlements which in a report examined some of the possible implications of central bank issued digital currencies.

Cryptocurrency exchanges escape regulations in Brazil because cryptocurrency is not a currency nor a security.

As a result, cryptocurrency exchanges are forced to take legal action against banks' account closures and seek legal injunctions to keep their accounts open.

The lack of regulation has prompted Brazil's largest cryptocurrency exchanges to create two separate cryptocurrency associations - the Associação Brasileira de Criptoeconomia and the Associação Brasileira de Criptomoedas e Blockchain with seemingly different approaches to potential cryptocurrency regulations.

Walter Stuber partner at Stuberlaw explained that currently the Brazilian IRS classifies cryptocurrency as a financial asset subject to capital gains taxation like any other security at a tax rate of 15 percent to gains of 35,000 reals or more.

There are no specific corporate cryptocurrency taxation rules.

Cryptocurrency capital gains are subject to the corporate tax rules applicable to companies in general and added to the taxable profits.