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Brazil's congress backs law for more crypto regulation

FILE PHOTO: Illustration shows representation of cryptocurrencies plunging into water

(Reuters) - Brazil's lower house of Congress late Tuesday approved a bill that aims to boost oversight of the country's cryptocurrency sector, after one of the world's largest crypto exchanges collapsed earlier this month.

The proposal, which would see the sector regulated by a government-appointed federal agency, will now pass to outgoing President Jair Bolsonaro for approval.

The new rules would apply to legal entities that exchange virtual currencies for local or foreign currencies, exchange virtual assets, conduct transfers or are involved in financial services connected to issuers or vendors of virtual assets.

According to local media, the bill would force all locally active crypto providers to have a physical entity in the country, with fines and even prison sentences for those breaching the new rules.

The bill would, according to media, give companies a grace period for compliance.

The move follows this month's collapse of Bahamas-based crypto exchange FTX, which prompted investigations by Bahamian and U.S. authorities.

Before the crunch, 30-year-old founder Sam Bankman-Fried secretly moved $10 billion of customer funds to his proprietary trading firm, Reuters reported, citing two people familiar with the matter.

Brazilian crypto advocates have backed the bill, saying it was important to establish rules in the industry. The country is one of the top 10 active markets globally for crypto, according to 2022 Chainalysis data.

(Reporting by Carolina Pulice; Editing by Bradley Perrett)