BRAZIL Law and Practice Contributed by: Alessandra Martins and Amanda Blum Colloca, Machado, Meyer, Sendacz e Opice Advogados
• brokers, which engage in intermediate and custodian activity. These entities will be regulated by the BCB and will require a licence therefrom. In theory, P2P operations are not allowed without mediation by a trading platform. It should be noted that the transference of stable coins in foreign cur - rency between Brazilian residents is considered a form of foreign exchange to only be conducted by virtual asset service providers authorised to operate in foreign exchange by the BCB. 10.6 Staking Staking is not currently regulated but will be regulated by ECP 109. Entities that conduct staking will be required to have additional cor - porate capital in the amount of BRL 2 million, since these activities are considered higher risk. The only entities allowed to conduct staking are intermediaries and brokers. 10.7 Crypto-Related Lending The provision of lending services relating to cryptocurrencies is not currently regulated but will be regulated pursuant to ECPs 109 and 111 (including in the foreign exchange market), since the transference of a virtual asset will in future be seen by the Brazilian regulatory framework as a change of ownership. 10.8 Cryptocurrency Derivatives Cryptocurrency derivatives fall within the scope of the CVM’s authority, are considered securities and are subject to prior approval from the CVM for public distribution. 10.9 Decentralised Finance (DeFi) DeFi is not specifically regulated. Pursuant to Article 3 of the Crypto Law, crypto-assets not representing securities are not subject to the Crypto Law, but instead to Law No 4,728 of 14
July 1965 (the “Capital Markets Law” ). They are not unregulated simply because they are securi - ties. 10.10Regulation of Funds All investment funds are subject to regulation by the CVM, based on the provisions of CVM Reso - lution No 175 of 23 December 2022( “Resolution 175” ). Funds that invest in blockchain assets are also subject to Resolution 175, as well as to Cir - cular Letters No 1 and 11 of 2018 issued by the CVM. Circular Letter 11 holds that investment funds are allowed to invest in blockchain assets, as long as their managers and administrators observe certain provisions, namely: • AML/CTF provisions; • ensuring that negotiations are conducted through “exchanges” that are subject to supervision by regulatory authorities in their countries of origin; • ensuring that the asset is not fraudulent by determining (i) whether the base software is free open source software, (ii) whether the technology is public, transparent, acces - sible and verifiable by any user, (iii) whether there are measures in place to reduce the risk of conflict of interests or excessive power concentration, (iv) the liquidity of the asset; (v) the nature of the network and consensus mechanisms, and (vi) the risk profile of the developers; • conducting due diligence on the asset to which the crypto-asset refers; • determining whether the crypto-asset should be considered a security and subject to the requirement for prior registration with the CVM; • adhering to the governance requirements associated with the crypto-asset; • providing disclosure through the white papers; and
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