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Brazilian Authorities Issues Rules To Classify Crypto as Securities

  • Three broad categories of crypto assets are defined in the paper. 
  • The CVM will keep an eye on the cryptocurrency markets as mentioned in the paper.

In a recent advisory opinion paper, the Brazilian Securities and Exchange Commission (CVM) addresses the topic of crypto-based securities. In it, a lack of regulation is acknowledged, and cryptocurrencies are defined as digitally represented assets. Safeguarded by cryptographic technology, and transacted and stored by Distributed Ledger Technologies (DLT).

Tokens that meet the new requirements must reflect digital versions of shares, debentures, subscription bonuses, right coupons, subscription receipts, split certificates, certificates of deposit of securities, and debenture notes.

Categorization For Securities

Moreover, similar considerations apply to other tokens, which, depending on their categorization, may also be considered securities. In addition, the CVM made it clear that previous permission or registration is not required for tokenizing assets. Nonetheless, if the resultant tokens are securities, they must adhere to applicable laws.

Three broad categories of crypto assets are defined in the paper. The first kind, known as payment tokens, consists of assets that aim to imitate the performance of fiat money. These functions include those of a unit of account, a medium of exchange, and a store of value.

Furthermore, the second kind of tokens is called “utility tokens,” and it includes any token that may be used on a specific product or service. Tokens that stand in for other assets, either real or virtual, fall under the third category, “asset-backed tokens.” Stablecoins, security tokens, and non-fungible tokens (NFTs) all fall under this category.

The CVM makes clear that, depending on the particulars of each token in this final class, they may be regarded securities. Moreover, according to the paper, the CVM will keep an eye on the cryptocurrency markets and take action based on these new criteria. 

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