Brazil's crypto bill was in limbo for the better half of 2022. The Brazilian House of Representatives would not approve the bill after it received Senate approval. The delay was because domestic and international exchanges took part in a lobby war for and against some sections of the bill. One of the sections fought over was asset segregation.

User funds ≠ company funds

The whole idea behind segregating user assets from company assets is to prevent retail investors from getting bent over in the event of another FTX-style meltdown. With asset segregation, by law, exchanges must hold all user assets in custody without mixing them with company assets. So, no loaning them out or repurposing them for other high-risk investments.

The reasons for implementing a user asset segregation law are (in a way) much like the self-regulatory proof-of-reserves systems implemented by exchanges (with varying levels of credibility).

Binance was having none of this

So, while Binance is criticizing other exchanges and launching a questionable proof-of-reserves system, they have been fighting against asset segregation in Brazil. Binance did not want this bill to pass with asset segregation included. And they got what they wanted; the House approved the bill on November 29.

Carlos Portugal Gouvêa from the Brazilian law firm PGLaw Advogados said:

“While the world is starting to look more carefully at the need for asset segregation, the Chamber of Deputies approves a bill excluding this topic, under pressure from market agents. It seems, once again, Brazil wanting to be the vanguard of backwardness, as we have done on other occasions, such as, for example, in the Civil Rights Framework for the Internet”

Note: Much of this post's source material and the above quote were reported and translated by Aaron Stanley, Head of Special Projects at the Filecoin Foundation and the Founder of Brazil Crypto Report.