Brazilian securities regulator plans to establish tokenization sandbox in 2024

Author: Turner Wright, Cointelegraph; Compiler: Songxue, Golden Finance

The Brazilian Securities and Exchange Commission (CVM) plans to launch a second regulatory sandbox program in 2024.

Speaking at Rio Innovation Week on October 4, Daniel Maeda, CVM’s head of institutional investor regulation, said the regulator will explore a regulatory sandbox for tokenized use cases, possibly starting in 2024. Maeda said the regulator decided to launch the second sandbox program after positive experiences with tokenizing approximately $36 million in assets.

Maeda said: “We will not define specific use cases because we want to allow innovations to reach the Brazilian Securities and Exchange Commission without previous restrictions. But there are indeed some tokenization application areas that have attracted our attention, such as agriculture and environment, social and Governance (ESG) area.”

The regulator’s director also stated that the CVM intends to wait for changes related to the Brazilian crypto market to be implemented, including those related to the country’s central bank digital currency Drex. According to Maeda, both securities regulators and central banks should consider developments in the digital asset space and how other countries are handling regulation.

"I have a lot of respect for the [Securities and Exchange Commission] and I don't think it's my place to point out whether their position is right or wrong," Maeda said. “What I can say is that the CVM sees many benefits in leveraging processes in this market. Through tokenization, investors not only increase the democratization of investing, but also increase transparency and reduce costs, which is what the committee believes in Values.”

Brazil’s central bank announced tighter regulations in October as cryptocurrency adoption surged in the country. Governor Campos Neto specifically pointed to the link between the use of cryptocurrencies and tax evasion or illegal activities.

Brazilian President Luiz Inácio Lula da Silva signed a legal framework in June setting out the different roles of the country’s central bank and CVM in regulating digital assets. In November, Brazil plans to launch a program to issue identity documents via a private blockchain as part of efforts to protect personal data and prevent fraud.