BRAZIL Law and Practice Contributed by: Fabio Cendão, Heitor Maia, Eduardo Faria and Gabriel Lobato, Faria, Cendão & Maia Advogados (FCM Law)
Within the BCB’s sphere, as the regime applicable to VASPs is consolidated, supervision is likely to become more operational and preventive, especially in relation to licensing, custody, asset segregation, transaction reporting and conduct towards users. 3. Licensing and Set-Up Requirements 3.1 Licensing Requirements A licensing requirement arises when a company intends to provide virtual asset services in Brazil, especially intermediation, custody or brokerage activi- ties. The Central Bank regime does not regulate the mere use of blockchain, but rather the professional provision of services involving virtual assets, whether by companies specifically incorporated as VASPs or by other institutions already authorised to operate by the Central Bank. From a territorial perspective, the operation of a VASP in Brazil presupposes incorporation in the country, with its registered office and management located in Brazil and subject to Brazilian law and authorities. Accordingly, foreign entities intending to provide vir- tual asset services to the Brazilian market may be required to establish a local presence and obtain Cen- tral Bank authorisation. Factors such as solicitation of clients resident in Brazil, offerings directed at the local public, or relevant management or operational control from the country may indicate a sufficient connection with Brazilian jurisdiction. The authorisation process is governed by the Cen- tral Bank regime, in particular BCB Resolution No 519, which establishes the procedures applicable to VASPs. As the licensing requirements are recent, the regula- tion provides for a transitional procedure for VASPs that were already operating on the effective date of the rule. This process occurs in two stages: first, the insti- tution must evidence pre-existing activity and undergo analysis of controllers, holders of qualified sharehold- ings and minimum capital requirements; afterwards, it is subject to the assessment of the other regulatory requirements imposed by the Central Bank.
Companies falling within this transitional regime may continue the regularisation process, but they are not exempt from obtaining definitive authorisation. In the event of refusal, they must cease providing the services, notify their clients and adopt the necessary measures to return or transfer the virtual assets and financial resources under their responsibility. 3.2 Set-Up Requirements To obtain authorisation as a VASP in Brazil, the appli- cant must initiate a process before the Central Bank and demonstrate capacity compatible with the nature, size, complexity and risks of the intended activity. The analysis includes, among other requirements: • financial and economic capacity of the controllers; • lawful origin of funds; • economic and financial viability of the undertaking; • technology infrastructure compatible with the com- plexity and risks of the business; • adequate governance structure; • good reputation of administrators, controllers and holders of qualified shareholdings; • knowledge by management of the sector and its risks, and technical qualification of administrators; • compliance with minimum capital and net worth requirements; and • indication of an effective and exclusive physical headquarters, with the use of a coworking space or virtual office as headquarters being prohibited. The Central Bank may require a business plan, tech- nical certification or independent assessment, addi- tional documents, interviews with controllers, hold- ers of qualified shareholdings and administrators, as well as carry out a pre-operational inspection to verify whether the implemented structure is compatible with the authorisation requested. In terms of local substance, management positions require residency in Brazil. In the case of limited liabil- ity companies, administrators must have a fixed term of office not exceeding four years. 3.3 Change of Control The acquisition, transfer or change of control of a licensed VASP in Brazil depends on prior authorisation from the Central Bank. BCB Resolution No 519 sub-
112 CHAMBERS.COM
Powered by FlippingBook