Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), said it created a working group to draft an experimental framework for tokenized securities.
The regulator said the framework will cover registration, custody, trading and settlement of securities using distributed ledger technology.
The group must submit its first proposal to the CVM board within 60 days of its formal installation, while a broader review will take 120 days, with a possible 30-day extension.
The group brings together 14 departments of the CVM and can consult government agencies, market associations, self-regulatory bodies and external specialists. It will also review cybersecurity risks, international regulatory models and the results of previous sandbox programs, the regulator said.
Brazil already applies securities law based on the economic characteristics of a token. The CVM’s 2022 guidance clarified that the use of blockchain does not change whether an asset qualifies as a security.
The new review will focus on what is happening around the asset.
Blockchains can combine functions that are typically divided between exchanges, custodians, registrars, depositories, and settlement systems. This raises questions about who controls the official property registry, how private keys are maintained, when transactions can be reversed, and who is responsible when systems fail.
