The new regulations recognize bitcoin as a digital representation of value that can be used as a means of payment and as an investment asset in the South American nation of Brazil. The vote for the new regulations took place on Tuesday evening in Brasilia, the country's capital city.

The bill, which encompasses a vast swath of the industry it refers to as "virtual assets," is almost ready to be signed into law and just requires the signature of the President. This does not in any way transform bitcoin or any other cryptocurrency into a form of legal cash in the nation.

The law gives the executive branch the responsibility of choosing which government agencies would be in charge of monitoring the market. When bitcoin is used as a form of payment, it is anticipated that the Brazilian Central Bank, also known as the BCB, will be in charge. On the other hand, when bitcoin is used as an investment asset, the country's Securities and Exchange Commission, known as the CVM, will be the regulatory body. In the process of drafting the overhaul legislation, MPs were assisted not only by the BCB and CVM but also by the federal tax authority (RFB).

The country of Brazil, which is home to a thriving cryptocurrency economy, has experienced periods in which more citizens trade cryptocurrencies like bitcoin than invest in the stock market. Now, the nation is working to pave the way for that to translate into a greater day-to-day usage in financial transactions by creating the necessary conditions.

However, the growth of the market in the country is not portrayed in an entirely good light throughout the text. The defeat of a provision on Tuesday's ballot that would have reduced some local, state, and federal taxes on the acquisition of bitcoin mining hardware was a major disappointment. Although the language was extremely narrow – the incentive would only be applicable to operations employing renewable energy sources – it does not appear to have been sufficient to be accepted.

Other provisions include the regulation of service providers such as exchanges, which, in order to function legally in Brazil, will be required to comply with a set of predetermined rules. The purpose of this bill is to regulate the establishment and operation of Bitcoin service providers in Brazil. Such entities are defined as those that provide trading, transfer, custody, administration, or sale of cryptocurrencies on behalf of a third party. After receiving specific authorisation from the central government, cryptocurrency service providers will be allowed to begin conducting business within the borders of the country.

One rule proposed a requirement that such companies explicitly separate their patrimony from the capital that is owned by customers, such as bitcoin that the firm custodies for users. The clause aimed to prevent situations like the one that occurred not too long ago with FTX, in which user funds and company funds were mixed together, and to assist in the recovery of user assets in the event that the company declared bankruptcy. The vote taken on Tuesday decided against it.