- A recent landmark ruling has seen Brazil’s Superior Court of Justice authorize judges to seize crypto from debtors who default on payments.
- Crypto is being treated similarly to traditional financial instruments like bank accounts.
- The court’s crypto seizure ruling signals that Brazil views digital assets as part of its system.
A recent landmark ruling has seen Brazil’s Superior Court of Justice (STJ) authorize judges to seize crypto from debtors who default on payments. This may hurt Brazilian crypto debtors but benefits the broader industry. The latest decision comes amid the country’s growing recognition of digital assets as legal forms of money. Here’s what this ruling means and how it fits into Brazil’s crypto ecosystem.
Could This Be A Legal Breakthrough For Crypto?
The ruling comes from the Third Panel of the Superior Court of Justice. This panel unanimously agreed that courts can now issue orders to crypto exchanges and seize assets from debtors.
In essence, crypto is being treated similarly to traditional financial instruments like bank accounts, which the country’s government has had the power to freeze for a long time.
According to an official statement from the court, “Although they are not legal tender, crypto assets can be used as a form of payment and as a store of value.” This means that while crypto isn’t recognized in Brazil as an official form of payment (as it is in El Salvador), it is legally recognized as money. An asset that can be used to satisfy debts.
How Did This Ruling Come to Light?
The ruling in question came from a creditor in Brazil, who petitioned for the recovery of funds they owed. The court agreed that if other assets can be used to repay debts, then crypto should be no different.
According to one of the judges on the panel, Minister Ricardo Villas Bôas Cueva, Brazil still lacks full regulations on crypto. On the other hand, the various bills the country already has in progress have already defined crypto as a “digital representation of value.” This recognition (however partial) lays the foundation for further laws in the future. It also allows courts and creditors to work with more certainty when it comes to recovering debts from crypto holders.
Brazil’s Growing Appetite for Crypto
According to a recent report from Chainalysis from last year, Brazil has quickly become one of Latin America’s top crypto hubs. Chainalysis pointed out that the region now ranks second in the region, in terms of “crypto value received.”
Brazil also ranks only behind Argentina, which has seen even more issues of currency devaluation than the former. Much of the growth in both of these countries comes from its citizens’ desire to hedge against the value of their currencies. In particular, stablecoins pegged to the US dollar are especially popular, with Brazilians now looking for safer ways to store and transfer their assets.
Brazil is also working toward a CBDC called Drex, which aims to support businesses looking for capital. The court’s decision to allow crypto seizure is more than just a legal technicality. It shows that the country is starting to view digital assets as part of its ecosystem.
