A newly proposed bill in Brazil’s Congress plans to establish a sovereign federal Bitcoin Reserve, potentially reshaping the country’s approach to digital assets.

The bill was introduced on Nov. 25 by Congressman Eros Biondini and seeks the creation of a Sovereign Strategic Bitcoin Reserve known as RESBit.

According to the legislation, the Bitcoin ( BTC ) reserve could shield the country’s sovereign reserve from currency fluctuations and geopolitical risks while also serving as collateral for the country’s forthcoming central bank digital currency, dubbed Real Digital (Drex).

A sovereign reserve is a pool of assets held by a nation’s central bank typically used to back the country’s fiat currency, stabilize the economy, and support international trade. Brazil had $355 billion in reserves as of December 2023, primarily backed by assets tied to global fiat currencies, such as the US dollar. 

Under the proposed legislation, the BTC reserve would complement existing financial assets up to a maximum of 5% of the country’s reserves through phased purchases. The country’s central bank would still manage the assets through public systems powered by blockchain and artificial intelligence technologies, with the support of a technical advisory committee formed by security experts.

Brazil’s Congress to weigh Bitcoin Reserve as hedge against global risks image 0

Brazil’s RESBit bill. Source: Câmara dos Deputados

Related: Brazil’s crypto imports surged 40% in September  

The bill refers to El Salvador’s move into Bitcoin as an example of progress. The Central American country made Bitcoin a legal tender in 2021 alongside the US dollar, seeking to enhance financial inclusion and encourage foreign investment.

Since then, El Salvador’s government has been actively buying Bitcoin, currently holding nearly 6,000 BTC worth $542 million on Nov. 26. 

According to the draft law introduced in Brazil, Bitcoin has helped El Salvador diversify its economy over the past four years. 

The bill also includes provisions for penalties in cases of noncompliance or poor management of the RESBit, stating that violators could face administrative or criminal sanctions. 

Now under review by the Speaker of Brazil’s House of Representatives, the legislation will be directed to committees for debate upon approval.

Brazil has been advancing guidelines for digital assets. In June 2023, the country implemented a legal framework granting its central bank authority to regulate and oversee virtual asset service providers. Additionally, tokens qualified as securities continue to fall under the oversight of the country’s Securities and Exchange Commission.

Related: Argentina overtakes Brazil in crypto inflows — Chainalysis