BRAZIL Law and Practice Contributed by: Fabio Cendão, Heitor Maia, Eduardo Faria and Gabriel Lobato, Faria, Cendão & Maia Advogados (FCM Law)
terparty risk, liquidity, cybersecurity and identification of the layers effectively controlled by the centralised entity. 5.2 DeFi Structures Brazil still does not have a specific corporate form or dedicated regime for the incorporation and operation of DeFi structures. In practice, where there is some centralised layer in the country, such as software development, an access interface, treasury, govern- ance, commercial activities, service provision or user relationship, projects tend to be organised through traditional legal structures, usually limited liability companies or corporations. DAOs are also not recognised as an autonomous cor- porate type in Brazil. Therefore, where they need to contract, hold treasury, interact with service providers, define responsibilities, comply with tax obligations or interact with regulators, a complementary legal struc- ture is usually required, such as a business company, association or foundation, depending on the purpose and degree of centralisation of the project. If the local structure carries out typical VASP activi- ties, such as intermediation, custody, brokerage, intermediated staking or the organised provision of virtual asset services, Central Bank authorisation and compliance with substance and prudential require- ments may be required. These requirements include an effective physical headquarters, qualified admin- istrators, governance, internal controls, AML/CFT, technological infrastructure compatible with the risks of the activity and applicable minimum capital. BCB Resolution No 520 does not create a specific regime for DeFi, but regulates the provision of virtual asset services and includes concepts relevant to this market, such as smart contracts, staking, wallets, market makers and liquidity providers. This may bring certain layers of DeFi projects closer to the regulatory perimeter where there is intermediation, identifiable control or organised provision of services to the mar- ket. This level of requirement, although appropriate for centralised structures that effectively provide regu- lated services to the market, may not always be pro-
portionate to early-stage DeFi projects, especially where there is no custody, traditional intermediation or direct control over users’ assets. For this reason, a specific and proportionate regulatory approach to DeFi could be more appropriate, distinguishing open protocols and experimental structures from models that, in practice, reproduce functions typical of regu- lated institutions. The trend is that regulation will not treat every DeFi protocol as a traditional financial institution, nor adopt a binary reading between centralised and decentral- ised structures. The analysis tends to shift to the real architecture of the protocol and to the identification of the layers in which there is effective capacity for control, intervention or economic influence. This includes access interfaces, on-ramps and off- ramps, sequencers, oracles, bridges, liquidity provid- ers, governance mechanisms, multisigs, administra- tive keys, pause or blocking functions, and settlement flows. In this logic, the regulatory focus becomes less the formal existence of an intermediary and more the identification of who can act, change parameters, control risks or response for critical failures in each layer of the infrastructure. In this context, possible regulatory paths include smart contract audits, greater transparency regard- ing on-chain governance, proportionate security and operational resilience criteria, and capital or reserve requirements calibrated according to the degree of centralisation, operational control and user exposure. 5.3 Liability In Brazil, there is still no consolidated case law or significant enforcement action specifically focused on liability for harm caused by DeFi protocols in the strict sense. To date, regulators and courts have approached the issue indirectly, based on existing legal categories, such as irregular offering of securi- ties, fraud, civil liability, consumer protection, money laundering, attachment of crypto-assets and unau- thorised provision of regulated services. The CVM already treats crypto-assets and DeFi as relevant topics for study, monitoring and supervision, but its enforcement activity has focused on structures
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