Brazilian Securities Watchdog Takes Closer Look at Tokenization

Brazil’s securities regulator has established a working group to explore tokenized securities.

This working group, the Comissão de Valores Mobiliários (CVM) announced Friday (July 17), will draft an experimental framework that examines the registration, custody, trading and settlement of tokenized securities using blockchain technology.

“Tokenization represents a structural transformation of the capital market and demands an equally innovative regulatory approach,” said Otto Lobo, the CVM’s president.

“With this Working Group, the CVM brings together technical expertise to assess opportunities, address challenges, and build, in a coordinated manner, the foundations for a modern, secure regulatory environment aligned with the evolution of the Brazilian capital market.”

The CVM wants the group to submit its first proposal within 60 days of being formally established. The group comprises 14 CVM departments, though it may seek the input of government agencies, market associations, self-regulatory groups and outside experts.

“The group will also be responsible for evaluating aspects related to cybersecurity, identifying any needs for improvement in the current regulatory framework, conducting or coordinating the evaluation of prototypes in experimental environments, and establishing the basis for future regulation of securities tokenization,” the CVM said.

The announcement was flagged Monday (July 20) in a report from CoinDesk, which notes the growth in Brazil’s tokenized assets space. The report cites data from Brazilian tracking platform RWA Monitor showing the country’s real-world asset market is now at around 12 billion reais, or around $2.34 billion.

According to the report, the CVM has also tested blockchain-based issuance and secondary trading with its regulatory sandbox. The working group will examine those experiments as it weighs a larger framework for securities issued, held and traded using distributed ledgers.

In other tokenization news, PYMNTS explored the potential of tokenized deposits in a recent episode of the “From the Block” podcast, featuring PYMNTS CEO Karen Webster, Ctrl Alt Founder and CEO Matt Ong, and Ryan Rugg, global head of digital assets for Treasury and Trade Solutions (TTS) at Citi.

Ong said that while the promise of on-chain finance is that the asset and payment can move simultaneously via atomic settlement, that requires regulated money that can operate across the same networks.

Tokenized deposits are a possible solution, though their usefulness hinges on interoperability among banks and between digital and conventional balances.

“If you’re in traditional cash or tokenized deposits, you should have fungibility between both instantaneously,” Citi’s Rugg said.