Brazil: Rio de Janeiro Will Buy Bitcoin for City Reserves
Rio de Janeiro is expected to be the first Brazilian city to buy Bitcoin as a store of value. Such a move from policymakers will lead to more flexible frameworks to help encourage further crypto development.
The seaside city of Rio de Janeiro is intending to invest 1% of the Treasury in Bitcoin. The mayor of Rio, Eduardo Paes, has promised to launch its coin dubbed “Crypto Rio.”
“We are going to launch Crypto Rio and invest 1% of the Treasury in cryptocurrency,”
said Paes, who announced establishing a working group to discuss crypto-related policies.
The lofty idea follows after the US city of Miami’s pro-crypto mayor Francis Suarez launched its native crypto, the “MiamiCoin”. He then distributed the profits from Bitcoin-based MiamiCoin among the city residents.
Eduardo Paes revealed his plans during Rio Innovation Week, Thursday, in conversation with Miami mayor Suarez, local news reported.
The idea is to simulate the initiatives of Suarez’s Miami, making Rio a crypto hub in the country.
Additionally, the mayor opened the possibility of offering a 10% discount on taxes, such as urban building or land tax (IPTU), for those who pay using Bitcoin.
An IPTU tax in Brazil is a federal tax that takes effect on urban property. The tax is collected by the municipality and is calculated on a deemed sales price of the property.
What It Means to the Residents
IPTU tax is the second most rejected tax by Brazilians, according to a public opinion poll on national taxes and problems, released by RAP – Brazilian Journal of Public Administration.
Many Brazilians vented out on social media about their burden to pay for various taxes in the country.
One Twitter user said, “Brazil has a lot of taxes besides income tax.”
Brazil has a lot of taxes besides income tax. IVA (VAT), ICMS, IPVA, IPTU, plus contributions like INSS (social welfare).
— Paula Orzabal (@PaulaOrzabal) June 18, 2013
— Khamonna Ikeda (@Fool_Del) April 15, 2011
Having said, a recent report in October from the Central Bank of Brazil (BCB) revealed that Brazilians held total crypto assets worth $50 billion.
According to Portal Du Bitcoin, Brazilians acquired cryptocurrencies worth $4.27 billion in 2021 itself and gained $496minnion in August.
With the country’s citizens embracing Bitcoin and other cryptos such as Ethereum, a discount on property tax move for those who own Bitcoins, would be of great benefit.
The city of Rio’s secretary Chicão Bulhões said that Rio will be a pioneer in Treasury investment in crypto assets.
“The idea is to take companies from this universe beyond the South Zone,” he noted.
Even with the idea of Crypto Rio and the rapid investments and interests surrounding it, one has to note that legal uncertainties still remain.
It is important to note that, even if the cryptoasset in question is being developed, issued and governed by a governmental entity, it is treated as same as Bitcoin from a legal and tax perspective.
Additionally, as payouts from the city’s reserves generated on these projects begin to take place, it will certainly have implications for both institutions involved and individuals.