Brazilian Securities Regulators Clarify That Investment Funds Can Invest In Crypto Assets

Comissão de Valores Mobiliários (CVM), the securities regulator in Brazil has given the approval to investment funds in the country to purchase cryptocurrencies, though indirectly through derivative products like futures and ETFs.

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Comissão de Valores Mobiliários (CVM), the securities regulator in Brazil has given the approval to investment funds in the country to purchase cryptocurrencies, though indirectly through derivative products like futures and ETFs.

Institutions in Brazil can invest in crypto by acquiring derivatives and foreign funds

Brazil’s regulators have allowed investment funds to hold Bitcoin and other cryptocurrencies indirectly via the purchase of derivatives and foreign funds.

The CVM has made it clear in the past that investment funds cannot invest directly in cryptocurrency projects.

The superintendent of institutional investor relations at CVM, Daniel Maeda, stated that they cannot do so until they are able to sufficiently explain how they will approach hard forks and airdrops.

The CVM told institutions via a circular issued by the Finance Ministry that they are free to invest in assets traded in other countries, provided they ensure that the assets are regulated in their respective jurisdictions.

The report by local media outlets pointed out that this latest order means that institutional investors in the country would be able to invest in funds of foreign companies whose portfolio is made up of most cryptocurrencies.

The Finance Ministry advised investment funds to invest in cryptocurrencies via regulated exchanges to avoid the rampant fraud, money laundering, and other illegal activities that exist in the sector’s regulatory vacuums.

The circular further advised to only invest in exchanges that are properly regulated by agencies that have the power to prevent and punish such illegal activities.

Care should also be taken and in-depth research conducted before investing in any cryptocurrency project to prevent investors from purchasing cryptocurrencies that are issued via fraudulent projects.

Investment funds should look out for some criteria when investing in a cryptocurrency. They should ensure that the underlying technology of a project is transparent, accessible, and verifiable by any user, while also confirming if the cryptocurrency is liquid enough.

The ministry advised investors to stay away from projects that are centralized, as such startups usually grant the development team too much power. Projects making use of overly aggressive sales techniques should also be avoided, the circular added.

The document acknowledged the difficulty of knowing the right price of a cryptocurrency asset. However, investment funds should make use of globally recognized price indices when investing in cryptocurrencies.

Brazil fast could displace Argentina as South America’s leading crypto nation

Argentina is known as the leading cryptocurrency country in Latin America but Brazil is looking to challenge that position, with the cryptocurrency industry experiencing explosive growth in Brazil over the past few months.

A report by Forbes in May revealed that more people are opening cryptocurrency trading accounts in Brazil than traditional brokerage accounts.

The Bitcoin trading market in Brazil has surged by over 40% over the past year despite the bear market, with Bitcoin trading in the country hitting $2.4 billion last year.

Grupo XP, Brazil’s largest independent brokerage, recently announced that it is planning launch an exchange within the next few years to facilitate Bitcoin and Ethereum trading in the country.

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