BRAZIL Law and Practice Contributed by: Fabio Cendão, Heitor Maia, Eduardo Faria and Gabriel Lobato, Faria, Cendão & Maia Advogados (FCM Law)
market. As to advertising, Brazil does not have a spe- cific code equivalent to the UK model for crypto-asset advertising. Even so, general rules on transparency, consumer protection and prevention of misleading offers apply, in addition to CVM or Central Bank rules on disclosure, offering, intermediation, conduct, risks and suitability of the product to the target audience, where applicable. 4.2 White Labelling White Label Structures and Use of Regulatory Licences In Brazil, a foreign or unlicensed company may, in principle, structure a white label operation with a duly authorised local entity, provided that the regulated activity is effectively performed by the licensed insti- tution. The licence cannot be treated as a mere formal cover for an unauthorised third party to carry out, in practice, regulated VASP activities. BCB Resolution No 520 allows VASPs to contract rel- evant services, including custody, technology, liquidity and other services necessary for their activities. Such contracting, however, must occur under the respon- sibility of the authorised institution, which remains responsible before clients, users, other market par- ticipants and the regulator. The contracted provider must act on behalf of and under the guidelines of the contracting VASP, and not as an independent entity offering regulated services in Brazil without its own authorisation. The viability of the structure depends on concrete segregation of functions, responsibilities and risks. The licensed entity must maintain effective control over onboarding, KYC/KYT, AML/CFT, custody, asset segregation, compliance, regulatory obligations, risk management and its relationship with the regulator, where applicable. The white label partner may act in technological, commercial or operational layers, but should not assume functions reserved to the author- ised institution without its own licence. If the structure involves securities, derivatives or tokenisation subject to the CVM, the capital markets regime must also be observed.
This logic is also relevant to crypto-as-a-service models, in which a regulated institution, fintech, digi- tal platform or non-crypto company begins to offer virtual asset functionalities to its own clients through the infrastructure of a VASP or another specialised provider. These models may be viable, but require clear con- tractual and operational allocation of responsibilities, so that the authorised entity retains control of the regulated activities and the commercial partner does not, in practice, act as a virtual asset service provider without its own licence. In Brazil, DeFi is not prohibited, but remains in an area of regulatory uncertainty, without a specific and com- plete regime. The new Central Bank framework was designed mainly for centralised CeFi structures, in which there is an identifiable entity that intermediates, custodies, executes or enables virtual asset services. Permissionless, open-source DeFi protocols with self- custody and on-chain governance remain in an area of lower regulatory definition. The main difficulty is iden- tifying who the regulated person would be when there is no traditional intermediary or central entity responsi- ble for performing the service. The Brazilian regulatory debate itself recognises this gap, especially regarding the need for clearer treatment of financial transactions carried out in decentralised environments. CeFi, VASPs and other regulated entities may, in prin- ciple, interact with DeFi protocols to structure or offer products and services in Brazil. Such use, however, requires regulatory caution, particularly where the centralised entity maintains the client relationship, selects the protocol, controls the interface, interme- diates access, administers financial flows or partici- pates in the economic execution of the transaction. The main concerns involve custody or self-custody, asset segregation, transaction traceability, AML/CFT, smart contract audits, on-chain governance, coun- 5. Decentralised Finance 5.1 Ability to Use DeFi DeFi and Areas of Regulatory Uncertainty
114 CHAMBERS.COM
Powered by FlippingBook