Brazil is considering spending up to 17 billion USD to add Bitcoin to its national reserves, and if realized, it will be the country with the most Bitcoin in the world.
The Brazilian Congress will hold a public hearing on this draft on August 20, hoping to create a turning point for the global cryptocurrency market and enhance the national financial position.
MAIN CONTENT
Brazil plans to allocate 5% of its foreign exchange reserves (~17 billion USD) to Bitcoin, making it the largest national owner of Bitcoin in the world.
This move has been widely debated with many conflicting opinions from authorities, stakeholders, and financial experts.
The trend of Bitcoin accumulation is not only occurring in Brazil but is increasingly spreading to many other states and countries around the world.
Is Brazil considering accumulating Bitcoin for the first time?
The consideration of using Bitcoin as a national reserve asset is currently being reviewed by the Brazilian Congress, with a prominent public hearing scheduled for August 20.
The draft law proposed by Congressman Eros Biondini in November 2024 calls for the Brazilian Ministry of Finance to expand the reserve portfolio with Bitcoin and other stable digital assets. Parties such as the Central Bank, Ministry of Finance, fintech companies, and the cryptocurrency community will participate in discussions, reflecting diverse perspectives.
The emergence of voices calling for hearings proves both the international appeal of Bitcoin and the multifaceted, cautious approach in Brazil's national financial policy-making process.
"...The public hearing is organized to discuss PL 4501/2024, concerning the Brazilian Government's formation of Strategic Sovereign Bitcoin Reserves and other related measures."
Luiz Philippe de Orleans e Bragança, Federal Representative, July 2024, Brazilian Congress
What is the mission of the Bitcoin bill in Brazil?
The mission of the draft is to diversify the foreign exchange reserve portfolio, capture the trend of financial innovation, and enhance national strengths on the global financial map through Bitcoin.
The proposed allocation of 5% of foreign exchange reserves (~17 billion USD) to Bitcoin marks Brazil not only as a pioneer in the Latin American region but also as a leader compared to many developed countries in accessing digital assets, creating a strong impetus for the domestic and international Blockchain ecosystem.
The draft aims for a sustainable financial roadmap, using Bitcoin to hedge against inflation and respond to changes in the global market while modernizing the governance of national assets.
"Discussing the formation of sovereign Bitcoin reserves is for the public interest and is very important for Brazil's prosperity. Bitcoin is digital gold, it is the gold of the Internet."
Pedro Giocondo Guerra, Chief of Staff of Vice President Geraldo Alckmin, March 2024, source Poder360
Who proposed the Bitcoin bill in Brazil?
Congressman Eros Biondini is the one who proactively proposed the Bitcoin reserve bill, with the cooperation of other supportive lawmakers on the innovation policy.
The proposal PL 4501/2024 reflects the trend of modernizing national financial policy, emphasizing the impact of Blockchain technology on budget management, laying the groundwork for significant changes in digital assets in Brazil.
In addition to Biondini, representatives such as Luiz Philippe de Orleans e Bragança also play a role in promoting the hearing process, reflecting a collective voice on digital asset investment for the national interest.
How much foreign currency reserves does Brazil hold, and if the bill is approved, how will it be allocated to Bitcoin?
Brazil currently holds nearly 341 billion USD in foreign exchange reserves. If the bill passes, it means that 17 billion USD (equivalent to 5%) will be allocated to Bitcoin.
This is the largest allocation ratio ever for a country, far exceeding countries currently investing in Bitcoin such as El Salvador, the UK, and Bhutan. The transfer of 17 billion USD to Bitcoin could change the balance of Bitcoin holdings at the national scale.
This massive influx of capital will have direct impacts on the global Bitcoin price, both reinforcing Bitcoin's role as a strategic asset and opening up discussions about its effects on liquidity, financial safety, and macroeconomic stability in Brazil.
How do experts and authorities in Brazil respond to the Bitcoin reserve draft?
The Bitcoin reserve draft has generated lively opinions from experts, politicians, and the Brazilian Financial and Central Bank authorities.
Supporters emphasize the value of hedging against inflation, modernizing national financial assets, and increasing credibility and attractiveness for foreign investment. However, many officials, such as Nilton David, Director of Monetary Policy at the Central Bank, have expressed concerns about risks, arguing that digital assets are not suitable for inclusion in the national foreign exchange reserve portfolio.
"It would not be reasonable to include digital assets in our foreign exchange reserves."
Nilton David, Director of Monetary Policy, Central Bank of Brazil, 2024
Experts warn of the risks of significant price volatility, legal risks, data security issues, and the potential for negative impacts on national financial safety if there is no inter-sectoral supervision and appropriate governance systems.
Fintech organizations, Blockchain startups, and economic researchers view this move as a launchpad for innovation, boosting the development of the Blockchain industry, attracting international investment, and competing for global financial positioning.
According to PwC's 2023 report, large institutional investment funds are increasing their Bitcoin holdings by the end of the year, with over 10% of their strategic asset portfolio allocated to cryptocurrency in emerging markets.
Source: PwC Crypto Hedge Fund Report, 2023
How will the public hearing on August 20 unfold? Who will participate and what will be the main content?
The public hearing on August 20 will gather representatives from financial experts, regulatory agencies, lawmakers, fintech companies, and the entire cryptocurrency community.
The content focuses on assessing the impact of including Bitcoin in national reserves, considering risks, benefits, operational scenarios, and proposing appropriate governance measures for Brazil.
Through this process, public decision-making that is transparent and monitored socially will build trust, allowing investors and the public to access information and contribute views on a major national policy.
If the draft is approved, what will the next steps be?
If the draft passes the hearing, the records will be sent to the Economic Development Committee for in-depth analysis, then presented to Congress, and finally to the President for a final decision.
This process ensures that all national financial decisions receive multi-layered legal guarantees, from social discussions, expert evaluations to verification by the highest authorities in the country.
If approved, this will not only be a significant milestone for the global cryptocurrency market but also open a new policy cycle in Brazil, elevating the influence of cryptocurrency in the international financial ecosystem.
How does the bill impact Brazil's cryptocurrency economy?
If 5% of foreign currency reserves are allocated to Bitcoin, Brazil's cryptocurrency market will witness an unprecedented large-scale shift.
This large influx of capital could drive transaction growth, open opportunities for developing investment products, DeFi services, and reinforce Brazil's role as a digital financial hub in Latin America and the world.
On the other hand, the caution of the Central Bank and conservative financial institutions will help maintain risk balance, avoiding a 'digital bubble' or negative impacts on monetary and fiscal stability when markets are volatile.
Is Brazil the first country to accumulate Bitcoin?
Brazil is the first major country to propose allocating over 10 billion USD to Bitcoin, but it is not the pioneer in the world regarding national Bitcoin reserves.
The first country to officially accumulate Bitcoin is El Salvador, which recognized Bitcoin as legal tender and purchased a large amount of BTC since 2021. However, the allocation ratio compared to the size of Brazil's national reserves, if approved, would surpass many countries taking similar actions.
Additionally, many states in the United States, such as Texas, New Hampshire, and Arizona, have also passed bond or digital asset reserve bills, reflecting a growing trend to include Bitcoin in national or organizational reserves.
Comparing Brazil's Bitcoin reserve actions with other countries
Compared to El Salvador, the UK, Bhutan, Brazil, if the bill is approved, will be the country holding the largest national Bitcoin reserves in the world in terms of USD value.
Country/State Estimated Allocation to BTC BTC Reserve Value (USD) Year of Implementation El Salvador ~1%-2% of total reserves ~360 million USD (as of 2024) 2021 Brazil (if approved) 5% of total reserves 17 billion USD 2024 (proposed) Kazakhstan N/A (from seized assets) Under implementation 2024 Texas (USA) Not announced Under research 2024
The table above shows that Brazil will surpass other countries in absolute value and the proportion of digital assets allocated to national reserves.
The actual implementation and prominent digital financial products of Brazil
Brazil has been a pioneer in the Americas in developing infrastructure and digital financial products, having approved a series of specific cryptocurrency ETFs.
Products like FOMO11, DEFI11, HASH11, and recently the Solana (SOL) ETF trading on the exchange in August 2024 have made Brazil a major cryptocurrency investment market, showcasing the dynamism and creativity of the local financial sector.
This shows that the move to accumulate Bitcoin is not isolated but is part of a series of reforms aimed at building a sustainable digital economy that effectively connects with global financial markets.
Which other countries or states are considering accumulating Bitcoin?
The movement to build national Bitcoin reserves is growing not only in the Americas but also spreading to Asia, Europe, and many other regions.
In the United States, states like Texas, Arizona, and New Hampshire have passed laws or initiatives to accumulate Bitcoin. In Asia, Kazakhstan has announced it will form Bitcoin reserves from recovered assets. Additionally, Pakistan, India, Sweden... are also exploring the possibility of accumulating cryptocurrency or establishing similar legal frameworks.
Brazil, with its large economic scale, if it legalizes this policy, will create a domino effect, encouraging many other countries to expand their reserve portfolios to include non-traditional assets and accelerate the adoption of Blockchain on a national scale.
The demand for Bitcoin reserves is rising sharply in emerging countries due to concerns about inflation and the desire to diversify reserve assets. If this trend continues, Bitcoin could become a new global reserve asset class.
Chainalysis Report 2024
Predicting the long-term impact of Bitcoin reserves on Brazil and globally
If Brazil takes the lead in Bitcoin reserves, it will be a historical turning point for traditional financial markets, helping to diversify the monetary system, hedge against inflation risks, and strengthen modernity in national budget management mechanisms.
This decision will pave the way for a new standard regarding reserve assets on a global level, encouraging other countries to broaden their perspectives and potentially causing waves of changes in laws, capital control policies, and the structure of international financial products.
The large influx of capital into cryptocurrencies will also accelerate impacts on prices, liquidity, and macroeconomic stability of Bitcoin in the global market, forcing investors, banks, and international financial institutions to update their portfolios and traditional risk management strategies.
The major challenges when a country accumulates Bitcoin
Despite the great opportunity, Brazil and countries accumulating Bitcoin also face significant risk management challenges.
The first challenge is the volatility of Bitcoin prices, as this asset has a history of significant price fluctuations in a short time, affecting the overall balance of national reserves. The second is legal, security, custody, and protection issues, handling the national treasury's private key – requiring tight control mechanisms to prevent loss, hacking, or abuse of power.
The final challenge is the political and social impact – as there is no broad consensus within the government or among economic schools, the risk of market reactions and confrontations between conservative and innovative forces is always present.
Global market scenarios if Brazil officially accumulates Bitcoin
If 17 billion USD is transferred to purchase Bitcoin, the global Bitcoin reserves will undergo a dramatic shift in ownership ratios, trading volumes, and market capitalization.
Banks and international investment organizations will have to adjust their asset portfolios, being more cautious with traditional fiat currencies, while Bitcoin could become a new counterbalancing asset class alongside gold and US Treasury bonds.
This is also a positive signal supporting the digital assetization process, developing Blockchain technology, and creating comprehensive innovation incentives for the banking, investment, and international financial management sectors.
Frequently Asked Questions
1. What is Brazil's Bitcoin reserve bill?
The bill proposes allocating 5% of the national foreign exchange reserves (~17 billion USD) to Bitcoin, aiming to diversify reserve assets and hedge against inflation.
2. How much foreign currency reserves does Brazil currently have?
Brazil currently holds approximately 341 billion USD in foreign exchange reserves, ranking in the top 10 globally by size.
3. Who benefits from Brazil accumulating Bitcoin?
Both the macro economy, the digital finance sector, cryptocurrency investors, and fintech businesses could potentially benefit from this policy.
4. Has any country in the world accumulated Bitcoin as national reserves?
El Salvador is the first country; many states in the USA, Kazakhstan, India, Sweden... are also researching.
5. What are the biggest risks if Brazil accumulates Bitcoin?
The biggest risks involve significant price volatility of Bitcoin and the risk of legal and technological insecurity when managing large asset volumes.
6. Where will the bill go after the hearing?
After the hearing, the bill will be reviewed by the Economic Committee, then passed to Congress, and finally to the President for a decision.
7. How could Bitcoin reserves impact the global Bitcoin price?
The large-scale purchases by a country like Brazil could increase demand, positively impacting Bitcoin's price and market capitalization.
Source: https://tintucbitcoin.com/brazil-du-tru-bitcoin-17-ty-usd/
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