Brazil’s securities regulator sets up task force with 60-day deadline for tokenization proposal
Brazil’s securities regulator, CVM, formed a group to draft an experimental framework for tokenized securities, with a primary proposal due within 60 days of installation.
Intelligence analysis by Llama
Brazil’s securities regulator, CVM, is studying tokenization in the country by forming a group to draft an experimental framework for tokenized securities, with a primary proposal due within 60 days of installation.
Brazil’s securities regulator is creating a team to make rules for using special kinds of computers called blockchains to help people buy and sell things like stocks and bonds. This is important because it will help make sure that people can trust the computers and the things they are buying and selling.
Analysis
A $60B Vote of Confidence
Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), has taken a significant step towards regulating tokenized securities by forming a working group to draft an experimental framework. The framework will cover the registration, custody, trading, and settlement of securities using distributed ledger technology. The group must send its first proposal to the CVM’s board within 60 days of being formally installed, while a broader review will run for 120 days, with a possible 30-day extension.
Why Cursor?
The CVM’s 2022 guidance clarified that using blockchain does not change whether an asset qualifies as a security. The new review will focus on what happens around the asset. Blockchains can combine functions that are normally split between exchanges, custodians, registrars, depositories, and settlement systems. That raises questions over who controls the official ownership record, how private keys are held, when transactions can be reversed, and who is liable when systems fail.
The Road Ahead
Brazil’s tokenized asset market has been steadily growing. Data from Brazilian tracking platform RWA Monitor show the country’s real-world asset market is now at around 12 billion reais, equivalent to roughly $2.34 billion. Debentures and commercial notes make up about $1.3 billion of that total. The CVM has also tested blockchain-based issuance and secondary trading through its regulatory sandbox. The new working group will review those experiments as it considers a broader framework for securities issued, held, and traded on distributed ledgers.
Key points
- Brazil’s securities regulator, CVM, formed a group to draft an experimental framework for tokenized securities.
- The framework will cover the registration, custody, trading, and settlement of securities using distributed ledger technology.
- The group must send its first proposal to the CVM’s board within 60 days of being formally installed.
- The framework will address critical issues like official ownership records, private key custody, transaction reversibility, and system liability.
If the new framework is successful, it could lead to a significant increase in the adoption of tokenized securities in Brazil, which could in turn drive growth in the country’s real-world asset market.
However, the development of the framework is still in its early stages, and there are several challenges that need to be addressed, including cybersecurity risks and the potential for system failures.
