Brazilian Securities and Exchange Commission CVM Defines Rules to Classify Cryptocurrency Assets as Securities

The Brazilian Securities and Exchange Commission (CVM) has clarified the criteria by which different cryptocurrency assets can be considered securities. Through the issuance of a guidance opinion document, the CVM defines different classifications for existing cryptocurrency assets, specifies which can be viewed as securities, and explains how it will intervene in these markets.

The Brazilian Securities and Exchange Commission (CVM) has issued a new guidance opinion document that touches on the issue of crypto-based securities. The document, which acknowledges there is still a vacuum on the subject due to the absence of specific regulation, defines cryptocurrencies as digitally represented assets, protected by cryptography tech, that can be transacted and stored through Distributed Ledger Technologies (DLT).

According to the new criteria, tokens that can be considered securities must be digital representations of the following structures: shares, debentures, subscription bonuses; right coupons, subscription receipts, and split certificates relating to the securities; certificates of deposit of securities; and debenture notes.

In the same way, other kinds of tokens can also be deemed securities depending on their classification. The CVM further clarified that the tokenization of assets will not be subject to prior approval or registration with the organization, but if the resulting assets are considered securities, they will have to comply with already existing security regulations.

The document also divides cryptocurrency assets into three different classes. The first one is called payment tokens, comprised of assets that seek to replicate the functions of fiat currency, including unit of account, medium of exchange, and store of value.

The second class is denominated utility tokens and is comprised of all tokens used to acquire or gain access to certain products or services. The third class is denominated “asset-backed tokens,” including all tokens that are digital representations of tangible or digital assets. This class includes stablecoins, security tokens, and non-fungible tokens (NFTs).

The CVM clarifies elements of this last class can be considered securities depending on the specifics of each token in the class. The document states the CVM will continue surveilling cryptocurrency markets and will act according to these new definitions. However, none of these criteria are final, and they can change in the future when regulation on the subject gets passed.

Last month, the CVM subpoenaed Mercado Bitcoin, a local cryptocurrency exchange, on its fixed-income token investment offerings.

What do you think about the new securities definition for crypto assets in Brazil? Tell us in the comments section below.