Brazilian Investment Funds Can Now Invest in Cryptocurrencies

Brazilian Investment Funds Can Now Invest in Cryptocurrencies

Brazil’s securities commission (CVM) has approved a new set of guidelines that will consider cryptocurrencies as financial investment products. The regulatory authority will now allow funds to make cryptocurrency-based investments by offering them the same protections that are applicable when purchasing stocks and bonds.

After much consideration, the Brazilian Securities Commission (CVM) has approved a new set of rules that will allow established investment funds to purchase cryptocurrencies. This opens a way for regulating crypto assets on the same scale as financial investment funds (FIF), such as stocks, foreign exchange, multi-markets and fixed income.

The financial regulator’s decision comes soon after outgoing President Jair Bolsanaro signed the country’s much awaited crypto bill into law last week. The framework that was approved by Brazil’s Chamber of Deputies in November, suggests that the government appoint federal agencies to properly regulate the sector. According to provisions of the bill, the Central Bank of Brazil (BCB) will be in charge of overseeing crypto tokens that will be used for payments, while the CVM will regulate crypto that are considered as investment products. The securities commission will offer companies the same protections when investing in cryptocurrencies as they are provided with other financial investment products such as stocks and bonds.

The guidelines require all operations that include buying, selling and trading of cryptocurrencies in Brazil to be conducted via exchanges approved by the central bank (BCB) or the securities commission (CVM). In cases where the investments are made through offshore platforms, the transactions will have to be overseen by a local agent authorised by the regulators.

Brazilian Investment Funds Can Now Invest in Cryptocurrencies

“In any way, these institutions will have legal competence to supervise and inspect the operations carried out, including with regard to curbing abusive practices in the market, as well as money laundering and financing of terrorism and proliferation of weapons of mass destruction,” explained the CVM.

However, not all digital tokens will fall into the CVM’s definition of crypto assets. The standard does not cover financial instruments and securities like shares, debentures, and stocks that are represented as digital tokens. Back in 2018, the securities commission had issued a ruling banning institutional funds from investing in cryptocurrencies home or abroad. However, the agency reversed its decision a few months later by allowing companies to purchase crypto assets offshore, but indirectly. At the time, the country’s crypto regulatory framework first introduced by Deputy Aureo Ribeiro was still under works.

In October, the securities commission released a guidance opinion document which included guidelines for the capital markets in relation to cryptocurrencies for better understanding of how the instrument could be regulated in an organised manner with investor protection.

Draft document of Brazil’s crypto framework was first approved by the Chamber of Deputies in December 2021, and sent to the country’s Senate for further approval. The upper house of parliament suggested several amendments to the bill, like segregating customer funds from reserve assets on a crypto exchange, eliminating taxes on crypto mining operations, and implementing a so-called “transition rule” that would require all cryptocurrency service providers in the country to pivot to the new regulations as soon as it was enacted as law. The bill was sent back to the Chamber for a revote where Deputies rejected the Senate’s provisions. The Chamber decided to pass larger parts of the bill explaining that the suggestion to segregate customers’ assets could hinder the industry’s growth in the country, and that only a designated digital asset regulator will be able to define what is better for the sector. The draft was then sent to the desk of President Bolsanaro on November 29, and after reading he passed the bill into law on December 22.

Brazil is one of the top ranking nations when it comes to cryptocurrency adoption. According to numbers published by the country’s tax authority (RFB), almost 42,000 companies and over 1.5 million residents purchased crypto in the months of September and October, breaking previous records. Due to its increasing popularity, banks including Nubank, Santander and Itau have started to or have plans to offer crypto asset related services to their customers. The federal government is also working on a digital version of the real, Brazil’s local currency. The central bank issued digital currency (CBDC) is expected to be launched in 2024.

Companies across Brazil will be given 180 days or six months to comply with the new cryptocurrency regulations.

Also Read Huge Social Security Increase Coming in 2023: How Much Will Your Check Be?

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