The attitudes of the Minister of Economy, Fernando Haddad, and President Luiz Inácio Lula da Silva, regarding the regulation of cryptocurrencies in Brazil, reveal a serious misperception about what is at stake. By trying to control a decentralized financial system that was designed to be immune to censorship, they may end up further weakening the Brazilian economy and encouraging the creation of a parallel financial market, invisible to state control.
1. Lack of Technical Knowledge and Limited Training
Fernando Haddad, despite having served as Minister of Education and having political experience, has publicly admitted that his training in economics was limited, with only three months of study in the field. This lack of technical depth is worrying when it comes to regulating a system as complex and innovative as cryptocurrencies, which operate with technologies such as blockchain and smart contracts. Haddad, therefore, does not have the necessary background to understand the nuances of this financial revolution. Furthermore, President Lula, who does not have a college education and often boasts of his self-taught education, finds himself in charge of crucial decisions that could have a profound impact on the Brazilian economy, without the necessary understanding to foresee the long-term consequences.
2. Attempts at Control and Their Side Effects
By trying to impose strict control over cryptocurrencies, Brazil runs the risk of encouraging the creation of invisible financial flows, outside of regulation. What the government fails to understand is that the decentralization of cryptocurrencies, by its very nature, prevents any form of censorship or state oversight. Instead of strengthening the economy, the attempt to centralize this market could result in the creation of a robust parallel market, where transactions are carried out outside the radar of the Federal Revenue Service, making oversight more difficult and tax collection more complex. In addition, decentralized platforms could proliferate, making it impossible for the government to exercise control over the flow of capital.
3. The Danger of Underestimating the Autonomy of Cryptocurrencies
Cryptocurrencies such as Bitcoin and other blockchain-based currencies were created precisely to avoid centralized control, and their main characteristic is their resistance to censorship. By trying to apply excessive regulations, the government is disregarding one of the greatest financial innovations of recent times, which was created precisely to operate without the need for intermediaries. If the Brazilian government insists on strict control, it runs the risk of alienating citizens from the traditional financial system, which will come to be seen as inefficient and excessively bureaucratic. Instead of controlling cryptocurrencies, the government may end up destabilizing trust in Brazilian financial institutions, leading Brazilians to seek safer and more decentralized alternatives.
4. Brazilian Creativity and the Parallel Market
Brazil has always been known for its creativity in finding ways to circumvent laws and regulations that are considered unfair or ineffective. During the era of the parallel dollar, Brazilians demonstrated a remarkable ability to create solutions outside the traditional financial system. Today, with the rise of cryptocurrencies, the same creativity will be applied to circumvent government regulations. Decentralized platforms, smart contracts and anonymous wallets will make the financial market even more difficult to control. By trying to regulate excessively, the government may simply be pushing transactions beyond its reach, creating a network of invisible and unsupervised transactions that may be more difficult to monitor than the parallel market of the past.
5. Brazil as a Testing Ground
Brazil appears to be positioning itself as the first country to test this type of approach on a large scale. The government seems to believe that it can simply apply a traditional model of control over a decentralized system without understanding the consequences. This move could have devastating repercussions for the Brazilian economy, which is already facing challenges such as inflation and currency devaluation. The imposition of rigid rules could result in capital flight and an erosion of confidence in the national financial system. Instead of strengthening the real and the Brazilian market, this attempt at control could further encourage financial decentralization, creating a thriving and invisible parallel market.
6. Risks to the Brazilian Economy and Currency
Attempting to over-regulate cryptocurrencies could drive investors and citizens away from the formal financial market, which will be seen as a rigid and overly controlled system. This could weaken the Brazilian currency, as many will opt for safer and more reliable alternatives, such as decentralized cryptocurrencies. The result could be a devaluation of the real, rising inflation, and the perpetuation of a vicious cycle of distrust in traditional financial institutions. The government’s approach, without adequate understanding of the technologies involved, could accelerate this process of economic weakening, leaving Brazil in an even more delicate financial situation.
Conclusion
Brazil is positioning itself as the first testing ground for economic policies that attempt to control a decentralized and global financial system, but without the necessary technical knowledge. The decisions of the Minister of Economy, Fernando Haddad, and President Luiz Inácio Lula da Silva could lead to an invisible and parallel market, completely outside the control of the State, which will further weaken the economy and confidence in the real. The lack of understanding about cryptocurrencies and how they work could result in economic destabilization, where the population will seek solutions beyond the reach of the government. If there is no deeper understanding of cryptocurrencies, Brazil runs the risk of making an irreparable mistake, which
can be difficult to fix.