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Brazilian Authorities Issues Rules to Define Crypto as Securities

The Brazilian Securities and Exchange Commission (CVM), in a recent advisory paper, discussed crypto-based securities. The paper acknowledges the lack of regulation and defines cryptocurrencies as digitally represented assets secured by cryptographic technology and transacted and stored by Distributed Ledger Technologies (DLT). Tokens meeting the new requirements must consider digital versions of shares, debentures, subscription bonuses, right coupons, subscription receipts, split certificates, certificates of deposit of securities, and debenture notes.

Furthermore, the same considerations apply to other tokes, which may be considered securities based on their categorization. Additionally, the CVM cleared that previous permission or registration is not necessary for tokenizing assets. Nevertheless, if the tokens turn out to be securities, they must follow the applicable laws.

The paper defines three broad categories of crypto assets.

The first one is called payment tokens, which contain assets that aim to imitate fiat money’s performance. The functions include the ones of a unit of account, a medium of exchange, and a store of value.

The second type is called “utility tokens” and consists of any token that may be used on a certain product or service.

The third type consists of tokens that stand in for other others, real or virtual, “asset-based tokens.” It contains stablecoins, security tokens, and non-fungible tokens (NFTs).

The CVM specifies that, depending on the specifics of each token in this class, they are also regarded as securities. Furthermore, the paper states that the CVM will keep an eye on the cryptocurrency markets and take action based on these new criteria.