Brazilian Regulator Prohibits Investment Funds From Buying Cryptocurrencies

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January 17, 2018 12:21 AM

Brazil’s securities regulator has announced that investment funds may not invest directly in cryptocurrencies, and it projected that guidance on indirect investments – for example in foreign virtual currency derivatives – will be made available following further internal deliberations.

Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), has declared that “cryptocurrencies cannot be defined as financial assets … and for this reason, their direct purchase by investment funds … is not permitted.” The announcement came in an official circular dated January 12.

The memorandum goes on to explain that the CVM has also received inquiries regarding the possibility of launching investment funds expressly to “invest in other vehicles, based in jurisdictions where they are allowed and regulated,” which are in turn invested in cryptocurrencies, as well as “in [cryptocurrency] derivatives in other jurisdictions, where they are allowed to be traded in regulated markets.”

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The document notes that discussions on cryptocurrency investments are still in their early stages in CVM circles, and that the body might ultimately determine that existing regulations “prohibit, restrict, or even criminalize trade in such investment vehicles.” Any entity that puts money into that kind of a scheme, therefore, risks losing it as a result of cybersecurity vulnerabilities or future pronouncements regarding the legality of that investment.

In light of the fact that the CVM has not yet reached any conclusions on the matter, it recommends that investment funds await further instruction before making these kinds of indirect investments in cryptocurrencies.

In an October 11, 2017 announcement, the CVM had declared that the digital assets associated with certain token offerings, or ICOs, fit its definition of securities, and that those tokens are considered to be in violation of its regulations, meaning that the entities offering them would be subject to penalties. Furthermore, the statement warned that tokens cannot be legally traded on cryptocurrency exchanges. 

Translations were provided by ETHNews staff.

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether and BTC.

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