Banks, Financial Services, Fintechs and Digital Assets Newsletter – 2024, April

REGULATION

Federal Executive Branch

SPA/MF Normative Ordinance No. 615, April 16, 2024

The Ministry of Finance, through the Secretariat of Prizes and Betting (“SPA”), published SPA/MF Normative Ordinance No. 615, of April 16, 2024 (“Normative Ordinance”), establishing general rules applicable to payment transactions made by agents authorized to operate the lottery modality of fixed-odd bets (“Sports Betting”), in virtual or physical modalities, as provided for in Law No. 14,790, of December 29, 2023 (“Law No. 14,790/23”).

The Normative Ordinance regulates matters such as:

• • cash-in and cash-out for bettors on Sports Betting platforms;
  • account modalities created by the Normative Ordinance;
  • graphic account;
  • risk control; and
  • contractual obligations.

The Normative Ordinance also establishes a six-month deadline for the entry into force of the prohibition on allowing or carrying out transactions for placing fixed-odds bets with legal entities that have not been authorized to operate fixed-odds bets under Law No. 14,790/2023. This deadline will be counted from the date of publication of specific regulations by the SPA establishing the rules on obtaining authorization for the commercial exploitation of Sports Betting by private economic agents within the Brazilian territory.

The prohibition applies to:

• • payment arrangement providers;
  • financial institutions; and
  • payment institutions, regarding the prohibition on allowing transactions (or initiating them) for the purpose of placing fixed-odds bets with legal entities that have not been authorized to operate fixed-odds bets under Law No. 14,790/2023.

The regulation also prohibits payment institutions not authorized by the Central Bank of Brazil (“BC”) from acting as intermediaries in payment transactions between the bettor and the betting operator, including through collection agents or payment managers.

This Normative Ordinance entered into force on the date of its publication.

Read the Normative Ordinance in full.

Read our Client Alert published on the Normative Ordinance.

Brazilian National Monetary Council

CMN Resolution No. 5,131, April 25, 2024

CMN Resolution No. 5,131, of April 25, 2024, amends CMN Resolution No. 5,051, of November 25, 2022, which provides for the organization and operation of credit unions.

In summary, the resolution updates the governance and management structure of credit unions, regulating credit transactions involving the sharing of funds and risks between credit unions that are part of the same system, expanding credit concessions. In addition, the resolution also provides, above all, for:

• • Policies for attracting new members or increasing capital stock by the number of members.
  • The conditions:
    • for members to be represented by appointed delegates at general meetings of single credit unions; and
    • for the BC to authorize the central credit union or the confederation made up of central credit unions to take over, on a temporary basis, the administration of a credit union subject to its supervision.
  • The possibility of corporate ownership in other entities by single credit unions, in order to put an end to the distinction between single credit unions and second or third level credit unions, among other matters.

This resolution entered into force on July 01, 2024.

Read CMN Resolution No. 5,131 in full.

Central Bank of Brazil

BCB Normative Instruction No. 461, April 02, 2024

BCB Normative Instruction No. 461, of April 02, 2024, amends BCB Circular Letter No. 4,001, of January 29, 2020, which announces the list of transactions and situations that can be reported to the Council for Financial Activities Control (“Coaf”) that may represent evidence of the crimes of:

• • “laundering” or concealment of assets, rights and amounts, provided for in Law No. 9,613, of March 3, 1998; and
  • financing terrorism, as provided for in Law No. 13,260 of March 16, 2016.

Items XVIII and XIX of article 1 of BCB Circular Letter No. 4,001 were amended.

This normative instruction entered into force on the date of its publication.

Read BCB Normative Instruction No. 461 in full.

BCB Normative Instruction No. 463, April 10, 2024

BCB Normative Instruction No. 463, of April 10, 2024, provides for version 6.0 of the Open Finance Customer Experience Manual.

The latest version of this manual is available on the Open Finance and the BC websites, as well as on the Brazilian Open Finance portal.

BCB Normative Instruction No. 409 August 29, 2023, was repealed.

The changes in the new version of the manual seek to clarify and define operational procedures that must be adopted by institutions participating in Open Finance in order to comply with some obligations established in Joint Resolution No. 1 of May 04, 2020.

Summary of changes

This normative instruction entered into force on the date of its publication.

Read BCB Normative Instruction No. 463 in full.

BCB Normative Instruction No. 464, April 11, 2024

BCB Normative Instruction No. 464, of April 11, 2024, clarifies the criteria to be adopted when estimating the standards for measuring the expected loss associated with the credit risk referred to in CMN Resolution No. 4,966, of November 25, 2021, and BCB Resolution No. 352, of November 23, 2023.

According to the BC, the purpose of this normative instruction is to guarantee the proper calculation of the expected loss and the consistent application of the rules by all institutions (financial and other institutions authorized to operate by the BC).

This normative instruction will enter into force on January 01, 2025.

Read BCB Normative Instruction No. 464 in full.

BCB Normative Instruction No. 467, April 22, 2024

BCB Normative Instruction No. 467, of April 22, 2024, announces version 7.2 of the Operational Manual for the Transaction Accounts Identifier Directory (DICT), which is part of the Pix Regulation, in accordance with article 2 of the Regulation annexed to BCB Resolution No. 1, of August 12, 2020.

BCB Normative Instruction No. 418 of October 26, 2023, was repealed.

This normative instruction will enter into force on May 02, 2024.

Read BCB Normative Instruction No. 467 in full.

ADMINISTRATIVE AND LEGAL DECISIONS

Federal Supreme Court – STF

STF upholds law authorizing BC to purchase paper money from foreign supplier

On April 08, 2024, the Brazilian Federal Supreme Court (“STF”) upheld the federal law that authorizes the BC to contract a foreign supplier for the production of paper money and metallic currency (“Law No. 13,416/2017”), in order to supply the Brazilian circulating system, by means of a decision rendered within the scope of the Direct Action for the Declaration of Unconstitutionality (ADI) No. 6,936.

At the time, the Court held that the Federal Constitution does not directly assign exclusive powers of this function to the Brazilian National Mint, so the Federal Government can regulate the matter by law, according to the need for this activity.

Justice Cristiano Zanin clarified that the Constitution only provides for the exclusive authority of the BC to issue coins, which cannot be confused with the activity of acquiring paper money and metallic currency.

The BC reported that, if the exclusive powers of the BC are maintained, it could lead to risks both in terms of shortage of cash and conducting the monetary policy, as it would not be possible to contract a foreign supplier in sufficient time to meet demand in a situation where the Brazilian National Mint is unable to supply.

Read the STF article in full.

NEWS

BC releases Integrated Report for 2023

At the end of March 2024, the BC released its Integrated Report (“RIG”) for 2023.

The RIG, which outlines how the BC is organized, its operations and its main attributions, governance, strategy and the main results generated for Brazilian society, is made up of three chapters:

• • Who We Are
  • Our Strengths and Resources
  • Our results

At a Monetary Policy Committee (“Copom”) meeting held in August 2022, the BC initiated a monetary flexibility cycle. Meanwhile, in 2023, the interest rate was reduced by two percentage points, reaching 11.75% in December. Currently (April/2024), the basic interest rate stands at 10.75%. Inflation was reduced from 5.78% in 2022 to 4.62% in 2023.

The RIG also highlights four of the BC’s initiatives in 2023:

• • Programa Aprender Valor – a program that expands financial education to Brazilian public school students;
  • Pix – the Brazilian instant payment system;
  • Open Finance – an open financial system that enables the sharing of information and transactions of bank accounts, from different platforms, by clients of financial products and services between different institutions authorized to operate by the BC; and
  • Drex – Brazil’s official digital currency.

Read the article in full.

Read the 2023 RIG in full.

NFT – Rise, fall and evolution

On April 03, 2024, our lawyers Fausto Teixeira and Guilherme Inaba, from the Banking and Finance team, contributed to the LexLatin article “NFT Auge, caída y evolución” (NFT Rise, fall and evolution).

In the article, Fausto pointed out that NFTs are similar to any risk asset, from the perspective of an investment asset, and can be used as the digital representation of digital or real-world assets (asset-backed tokens), although they are associated with the risks inherent in the digital asset market, such as cyber hacking or high operating costs to transfer such assets via blockchain.

According to Guilherme, NFTs are not failed assets, but assets whose use has evolved and whose focus and potential is perhaps “far beyond” that of an investment asset, given the variety of potential uses in the creation and trading markets. In addition, the evolution of regulation in the crypto asset market is also considered as a trigger for its vertiginous growth – which includes the NFT market.

Read the article in full.

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