Brazil’s Congress Explores A Bitcoin Strategic Reserve

5/30/1967- Brasilia, Brazil: Congress building. General view- two tall buildings in center with dome and inverse dome on either side- the capitol city that was carved out of the jungle.

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Could Brazil be the next country to adopt a bitcoin strategic reserve? Legislation is advancing through the country’s Congress that could make that an eventual reality.

The Chamber of Deputies held a hearing last week exploring legislation proposed by Federal Deputy Eros Biondini. The bill would allow an allocation of up to 5% of Brazil’s $344 billion international reserves into bitcoin.

Inspired by similar initiatives out of the United States and elsewhere, the proposal seeks to diversify the country’s reserve assets, hedge against currency and geopolitical risks, and position Brazil as a leader in digital asset innovation. It also includes provisions for keeping the assets in cold storage and semiannual reports to Congress.

During the hearing, Biondini highlighted the project as a way to ensure economic sovereignty, align with global innovation trends and position the country as a global leader:

“Brazil is always playing catch-up, but it’s great to see that this time we’re at the forefront.”

While the hearing concluded without consensus, the bill advanced to committee review where it awaits technical refinements before a potential plenary vote in the main chamber.

Support from High Places

The proposal was received favorably by several members of the government and the Economic Development Committee, which hosted the hearing, including Deputy Luiz Philippe de Orléans e Bragança:

“We are not adopting anything new. Bitcoin is becoming institutionalized. Large banks, countries, and sovereign wealth funds are adopting bitcoin because of its reach.”

During his testimony, Pedro Henrique Guerra, chief of staff to Brazil’s Vice President Geraldo Alckmin, lauded the potential of adding an improved, digital version of gold to the country’s financial position and argued that government investments in bitcoin can and should target large, long-term objectives:

“With the issuance of bitcoin-backed Treasury bonds, and the creation of thematic funds for long-term infrastructure and education policies, we will be facing nothing less than a revolution in our public finances.”

Government Has No “Negative Bias” Towards Bitcoin

Representatives from the government and Brazil’s Central Bank pushed back against the concept. While this shouldn’t come as a huge surprise, it’s notable that the objections from the officials were technical rather than ideological.

Daniel Leal, an official representing Brazil’s Ministry of Finance, emphasized that bitcoin itself is intriguing, but it doesn’t fit the profile of a reserve asset at this stage:

“I want to make it clear that I have no negative bias toward bitcoin itself. I recognize that it has gained relevance and value…But it’s important to differentiate the purposes. In the case of international reserves, as already explained, the purpose is much more closely linked to the country’s financial stability, managed by the Central Bank.”

Luis Guilherme Siciliano, head of Department of International Reserves at the Central Bank, echoed the point that bitcoin is too volatile to fit into the bank’s reserve basket:

“Central banks are naturally guided by conservatism. This means that international reserves need to be made up of low-volatility assets. In periods of stress or extreme crises, including geopolitical crises, local markets experience sharp spikes in volatility. Therefore, reserve assets must fulfill the opposite function: provide stability, serving as a buffer so that the central bank can use them in these critical moments.

Leal suggested that a sovereign wealth fund managed by the Ministry of Finance may be a more appropriate vehicle, although not without its complications.

A Missed Opportunity?

Bernardo Srur, CEO of ABCripto, a lobby group representing the industry, told local outlet Portal do Bitcoin that even if this initiative doesn’t advance as hoped, it is still important for educational purposes and keeping the country’s leaders informed about emerging trends:

“The most important thing is that the country continues to monitor international transformations in a planned manner, assessing risks and opportunities. This isn’t an immediate rush, but rather keeping the country in tune with trends that may become strategic in the future.”

Still, other leaders in Brazil’s industry are calling for more urgency, particularly as the United States has abruptly changed its position towards the asset with the change in presidential administration. Other countries are expected to follow this example.

Julia Rosin, head of public policy at Bitso Brasil, said that “Ignoring this movement could represent a missed strategic opportunity for Brazil, especially as other countries structure policies to integrate virtual assets into their financial systems,”

Diego Kolling, who serves as head of bitcoin strategy for Meliuz, an e-commerce firm that transformed itself into Brazil’s first bitcoin treasury company in May, reframed the question in his testimony:

“The question is not whether Brazil needs bitcoin, but how long we can afford to ignore it.”