The Brazilian Congress is currently discussing a new bill that would formally incorporate Bit Coin into the national financial framework. If passed, Brazil could invest up to 5% of its foreign exchange reserves in Bit Coin, amounting to approximately $18.5 billion, potentially becoming the first G20 member to legislatively include Bit Coin in national reserves.
Bit Coin Inclusion in Foreign Exchange Reserves System Design
According to official details, the bill numbered PL 4501/2024 will establish the Strategic Sovereign Bit Coin Reserve (RESBit). The text authorizes the central bank and finance ministry to allocate Bit Coin within the 0-5% range, with a five-year holding period before use, unless specially approved by Congress.
To reduce technical risks, the draft requires cold wallet custody, independent audits every six months, and AI monitoring of abnormal transactions. Coindoo notes that the bill has passed the first committee in the Chamber of Deputies and must next undergo a full Chamber vote, Senate approval, and presidential signature to take effect.
Legislative Pathway and Risk Management
Some questioned whether this is imitating El Salvador, but supporters distinguish their approach from El Salvador's purely administrative order:
This is not El Salvador 2.0, but a more solid institutional framework.
However, volatility remains the greatest concern. Critics argue that high volatility conflicts with the central bank's three principles of "safety, liquidity, and returns".
Additionally, the International Monetary Fund (IMF) previously opposed El Salvador's Bit Coin legal tender plan. It remains to be seen whether the IMF will apply pressure if Brazil uses foreign exchange reserves to buy Bit Coin. The central bank must also ensure wallet security, train personnel, and establish a transparent purchasing mechanism to gain market trust.
Will Be the First G20 Country Case
Currently, Brazil's foreign exchange reserves are about $370 billion, the largest in Latin America. Using 5% would bring significant long-term buying pressure. Chainalysis analyzes that this could initiate the "Sovereign Bit Coin Phase 2.0", prompting emerging markets like Argentina and Indonesia to re-examine their foreign exchange reserve strategies, with other central banks facing discussions about diversifying dollar positions.
Market and International Pressure
Asset managers speculate that if Brazil continues to advance its Bit Coin reserve plan, international institutional ratings and loan conditions might be pressured short-term, with long-term effects depending on price trends and regulatory transparency. Critics warn: "Bit Coin lacks precedent as a sovereign asset, and even if the bill passes, implementation details will test the central bank's capabilities."
After all, if mismanaged and hacked, it would be a national-level joke.
This Brazilian legislation accelerates Bit Coin's attempt to enter national central bank balance sheets. Whether Brazil will open this door will be determined in the upcoming congressional vote, bringing new options and challenges for global central banks.
