By Comissão de Valores Mobiliários (CVM), Brazil’s securities regulator, has supposedly endorsed investment funds to indirectly put their assets into the cryptocurrency ecosystem, through the acquisition of derivatives and foreign funds.
BRAZILIAN MINISTRY OF FINANCE PERMITS INVESTMENT FUNDS – IDEALLY VIA CRYPTOCURRENCY EXCHANGES
The Finance Ministry of Brazil issued a circular where it was published that funds can also be invested into “other assets” and traded in other jurisdictions, as long as there are regulations where the funds are to be traded.
According to the news outlet, the implication is that investment funds are now able to purchase a share in a foreign fund. The portfolio will consist mostly of cryptocurrencies such as bitcoin (BTC), Ethereum and Litecoin.
It should be noted that the Ministry of Finance’s circular does demonstrate that there is a possible space for fraud. It is known that money laundering or other illicit activities exist in this space. It is for this reason that people are advised by the Ministry of Finance that should they invest in cryptocurrency products through regulated exchanges. The circular goes on to explain that these platforms, should be subjected to “the supervision of regulatory agencies that have powers to restrain such illegal practices.”
The ministry of finance further stated that investors should take precautions before purchasing cryptocurrencies. This is specifically to avoid buying tokens which are issued by fraudulent ICOs. The circular highlights six necessary precautions to make, which includes verifying whether their technology is “transparent, accessible, and verifiable by any user,” and whether the token has sufficient liquidity.
Interestingly, the circular also says that funds should check “whether there are arrangements that raise conflicts of interest or the concentration of excessive powers on the issuer or promoter of the crypto asset, or the use of aggressive sales techniques.”
The circular adds that it may be challenging to assess the “right price” for each crypto asset. It reads that “one possible parameter, in this sense, is the investment in crypto assets that contain the permanent disclosure of globally recognised price indices prepared by independent third parties.”
Daniel Maeda, the superintendent of institutional investor relations at CVM, made it clear in a previous circular that investment funds are not permitted to invest in cryptocurrencies directly. Investment funds that put their money into the cryptocurrency ecosystem, per the CVM, will also have to account for how they will approach hard forks and airdrops.
BRAZILIAN EFFORTS TO SUPPORT CRYPTO-RELATED BUSINESS
The Brazilian government has notably made efforts to support crypto-related businesses, at a time in which Grupo XP, the largest independent brokerage in Brazil, revealed that it intends on launching a bitcoin and Ethereum trading platform by the end of 2018.
The Administrative Council for Economic Defence (CADE), which is the Brazilian antitrust watchdog, has launched an investigation to determine whether banks are intentionally harming cryptocurrency exchanges by limiting their operations.
However, the Brazilian government has also distributed a 14-point questionnaire to local cryptocurrency exchanges this year to acquire more knowledge about the businesses and to understand their potential use in money laundering.
What do you think about the Brazilian Government’s efforts to support crypto-related businesses? What precautions do you take before buying cryptocurrencies? Let us know in the comments below!
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