Brazil’s Congress Considers Bitcoin Reserve to Hedge Against Global Risks

A newly proposed bill in Brazil’s Congress seeks to establish a sovereign federal Bitcoin reserve, which could transform the country's approach to digital assets while enhancing economic resilience and asset diversification.

Introduced on November 25 by Congressman Eros Biondini, the bill proposes the creation of a Sovereign Strategic Bitcoin Reserve (RESBit). The reserve aims to act as a hedge against currency fluctuations and geopolitical risks, potentially bolstering Brazil’s financial stability and supporting the country’s future central bank digital currency (CBDC), Real Digital (Drex).

A sovereign reserve typically consists of assets held by a nation’s central bank to back its fiat currency, stabilize the economy, and facilitate international trade. As of December 2023, Brazil’s sovereign reserves totaled $355 billion, primarily composed of global fiat currencies like the US dollar.

Under the proposed bill, the Bitcoin reserve would be capped at 5% of the country’s total reserves and would be accumulated through gradual purchases. Brazil’s central bank would manage the Bitcoin reserve, integrating blockchain and AI technologies into public systems with guidance from a technical advisory committee comprised of security experts.

The bill highlights El Salvador's Bitcoin adoption as a model for Brazil. El Salvador made Bitcoin legal tender in 2021 alongside the US dollar, aiming to promote financial inclusion and attract foreign investment. Since then, the country has amassed nearly 6,000 BTC, valued at approximately $542 million as of November 26, 2024. According to the Brazilian proposal, Bitcoin’s role in diversifying El Salvador’s economy over the past four years has shown promise.

The bill also outlines penalties for noncompliance or poor management of the RESBit, with potential administrative or criminal sanctions for violators.

Currently under review by the Speaker of Brazil’s House of Representatives, the legislation will be sent to committees for further discussion once approved.

Brazil has been making significant strides in regulating digital assets. In June 2023, the country established a legal framework that empowers its central bank to regulate virtual asset service providers. Additionally, tokens classified as securities remain under the jurisdiction of Brazil’s Securities and Exchange Commission (CVM).

This proposed Bitcoin reserve could pave the way for Brazil to further embrace digital assets, positioning itself as a leader in the evolving landscape of blockchain-based finance.