BRAZIL Law and Practice Contributed by: Fabio Cendão, Heitor Maia, Eduardo Faria and Gabriel Lobato, Faria, Cendão & Maia Advogados (FCM Law)
2. Regulation 2.1 Regulators and International Alignment The main regulators for blockchain and crypto-assets in Brazil are the BCB and the CVM. The BCB is the central regulator of virtual asset service providers and certain transactions involving foreign exchange and international capital. Its approach has become increasingly prudential and operational, focusing on governance, internal controls, asset segregation, risk management, anti-money laundering, custody and business continuity. The CVM acts when the crypto-asset, token or tokeni- sation structure qualifies as a security or involves a public offering, intermediation, management, advisory or distribution in the capital markets. CVM Guidance Opinion No 40 consolidated the authority’s under- standing of crypto-assets that may be considered securities. In these cases, the CVM may supervise and sanction irregular offerings, intermediation and other activities. Brazilian regulators have sought alignment with inter- national standards, although the domestic model has been built gradually. The Central Bank has incorpo- rated central themes from the FATF agenda, such as VASP authorisation, anti-money laundering, govern- ance, internal controls, traceability of transactions and treatment of self-custodied wallets. There is also alignment with BIS discussions on the integration of virtual assets with payments, foreign exchange, settlement and prudential supervision. In the capital markets, the CVM follows an approach compatible with IOSCO principles, applying the securities regime where crypto-assets or tokenisa- tion structures have features of collective investment, public offering or regulated intermediation. 2.2 Crypto-Asset Regulatory Frameworks Classification and Regulatory Regime for Crypto- Assets and VASPs Brazilian regulators classify crypto-assets mainly according to their economic function and the rights attributed to the holder. Within the CVM, Guidance Opinion No 40/2022 distinguishes three main cat- egories: payment tokens, utility tokens and asset-
referenced tokens. The CVM itself recognises that the same token may fall into more than one category, depending on its characteristics, purpose and associ- ated rights. Where a crypto-asset has the nature of a security or collective investment contract, capital markets rules apply. In these cases, requirements relating to offer- ing, distribution, intermediation, custody, transpar- ency, risk disclosure and CVM supervision may apply. Regulated activities involving crypto-assets are mainly concentrated on the provision of virtual asset services on behalf of third parties. Central Bank regulation clas- sifies VASPs into three categories: virtual asset inter- mediaries, virtual asset custodians and virtual asset brokers. Brokers are authorised to carry out both intermediation and custody activities. Virtual asset intermediation includes, among other activities, the purchase, sale and exchange of vir- tual assets on behalf of third parties, subscription of issuances, portfolio management, acting as fiduciary agent, staking transactions and virtual asset services in the foreign exchange market. Under certain condi- tions, intermediaries may also act as electronic money issuers, liquidity providers, market makers and provid- ers of financial services in distributed ledger systems or similar systems. Virtual asset custody involves the safekeeping and control of the instruments that allow the exercise of rights over the assets, such as private keys. It also includes maintaining position records, reconciliation with on-chain information, compliance with move- ment instructions, processing of events affecting the assets and administration of relevant data relating to the holder. Direct, bilateral and occasional trading of crypto- assets between private parties, carried out in their own name and without organised intermediation, is not expressly prohibited in Brazil. The sensitive reg- ulatory point arises when a P2P model is operated professionally or commercially, with a platform, order matching, escrow, custody, settlement, fee charging or any facilitation of transactions on behalf of third parties, in which case the activity may fall within the
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