The Brazilian Securities and Exchange Commission (CVM) has clarified the criteria by which different cryptocurrency assets can be considered securities. By issuing an indicative opinion document, CVM identifies the different ratings of current cryptocurrency assets, identifies what can be considered securities, and explains how they interfere in these markets.
Brazilian Securities and Exchange Commission CVM addresses cryptocurrency classification
The Brazilian Securities and Exchange Commission (CVM) has issued a new guidance opinion document addressing the issue of encryption-based securities. The document, which acknowledges that there is still a vacuum on this subject due to the lack of specific regulation, defines cryptocurrencies as digitally representative assets, protected by encryption technology, which can be treated and stored through distributed ledger techniques (DLT).
According to the new standards, codes that can be considered as securities must be a digital representation of the following structures: stocks, bonds, underwriting bonuses; Correct vouchers, subscription receipts and split securities certificates; certificates of deposit of securities; and bond notes.
In the same way, other types of codes can also be considered securities depending on their classification. The Commission further clarified that the coding of assets would not be subject to prior approval or registration with the organization, but that if the resulting assets were to be considered as securities, they would have to comply with existing security regulations.
Classification system for cryptocurrency assets
The document also divides cryptocurrency assets into three different categories. The first is called payment codes, consisting of assets that seek to replicate the functions of the paper currency, including the unit of account, the means of exchange and the value store.
The second category is denominated utility codes and consists of all codes used to obtain or access certain products or services. The third category is “asset-backed symbols”, including all symbols that are digital representations of tangible or digital assets. This category includes stablecoins, security codes and non-exchangeable codes (NFTs).
CVM explains the elements of this last category that can be considered securities depending on the details of each code in the category. The document states that CVM will continue to monitor cryptocurrency markets and will operate according to these new tariffs. However, none of these criteria are final, and can change in the future when regulation is passed on.