Brazil allows investment funds to invest in cryptocurrency, details inside

• The Brazilian Securities and Exchange Commission (CVM) approved the ability for investment funds to hold crypto assets.
• Crypto assets can be included in a fund if they are traded in entities authorized by local or global authorities.

The Brazilian Securities and Exchange Commission (CVM) approved the ability for investment funds to hold crypto assets yesterday (23 December). The decision, according to the regulator, allows funds to operate in the crypto segment while paying attention to controls related to asset integrity and ownership.

According to the CVM, crypto assets must meet a set of criteria established by a new regulatory framework established in a law enacted by outgoing Brazilian President Jair Bolsonaro so that they can be included in fund portfolios.

The CVM only recently released a new regulatory framework for investment funds. The regulator explained in a note that the decision seeks to allow funds to operate in this new segment of the market while maintaining controls over the presence, integrity, and ownership of assets.

Crypto assets must meet a set of criteria in order to be included in a portfolio, which is in line with the regulatory framework for the sector approved by President Bolsonaro yesterday.

Brazilian authorities implementing AML/CFT guidelines

Crypto assets can be included in a fund if they are traded in entities authorized by the Brazilian central bank or the CVM, or by a local supervisor in the case of operations in another country.

These bodies must be legally competent to supervise and inspect the operations carried out, including implementing anti-money laundering (AML) and countering the financing of terrorism (CFT) guidelines.

In October, the CVM issued a market guidance opinion on the cryptocurrency sector. Although crypto assets are not expressly listed as securities in the document, market agents must observe the characteristics of each crypto asset to determine if it is a security.

The tokenization of assets, according to the opinion, is not subject to prior approval or registration by the CVM. However, token issuers and public token offerings will be subject to regulation as well.