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The Brazilian Securities and Exchange Commission (CVM) on Friday approved investment funds to hold crypto assets.
On December 23, the Brazilian CVM approved the ability for investment funds to hold cryptocurrency assets. According to the regulator, funds will be allowed to operate in the crypto sector while paying attention to controls related to integrity and ownership of the assets. The approval is however subject to a set of criteria established by a new regulatory framework that was enacted into law by outgoing President Jair Bolsonaro.
Brazil Signs Crypto Regulation into Law
On Thursday, the Brazilian president approved a crypto regulation bill that established a crime of fraud involving virtual assets that will come with a penalty of between four to six years in prison along with a fine. The bill further established a “virtual service provider” license, which will be required by digital asset firms, including exchanges and trading intermediaries. The bill does not allow Brazilians to use crypto such as Bitcoin as legal tender but does include various digital currencies under the definition of legal payment methods within the country.
Guidelines for Investment Funds to Include Crypto
Investment funds will be allowed to hold crypto assets but will be subject to a set of criteria established by Bolsonaro’s newly enacted law. Per this new law, crypto assets may be included in a fund if they are traded entities authorized by the CVM, Brazil’s central bank, or by a local supervisor in the case of operations in another country. Under the criteria, supervisory bodies must be legally competent to supervise and inspect the operations carried out, including ensuring that anti-money laundering (AML) guidelines are implemented, and counter-financial terrorism guidelines are adhered to.
Although there was a delay in approving the new regulatory framework, the CVM in October already published a guidance opinion for the market on the crypto sector. According to this guideline, even though crypto assets are not expressly included among securities, market agents must analyze the characteristics of each crypto asset, to determine whether it is a security.
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