Brazilian Securities Regulator CVM Initiates Inquiry Into Tokenization Operations

The Brazilian Securities Regulator (CVM) has begun sending letters to tokenization companies, inquiring about the nature of their operations. According to local reports, these letters require issuers to disclose which tokens were issued, their purported classification, and the assets supporting the issuance of such tokens.

Brazilian Securities Regulator CVM Investigates Tokenization Companies’ Activities

The Brazilian securities regulator CVM, the equivalent of the U.S. Securities and Exchange Commission (CVM), is reportedly probing the market for tokenization activities. According to local reports, the CVM has sent letters to some companies that lend tokenization services to third parties, requiring data linked to their operations and the kind of tokens issued in these activities.

Some of the questions asked in these letters refer to the number of tokenization operations completed by each company, the name of the assets supporting these operations, and the purported classification of each one of these tokens (utility tokens, payments tokens, or securities).

Per Valor Economico’s reports, Liqi, Peerbr, Hurst Capital, and two more tokenization companies in Brazil that preferred not to be mentioned confirmed they had received these letters. However, other companies like Tokeniza and Foxbit have not received this kind of investigative letter.

A source familiar with the matter stated that tokenization providers have received these inquiry letters to report on their tokenization activities starting January 2023. The source declared:

The regulators say that this is a market mapping that they are doing, but this has made the tokenizers uncomfortable, because at the end of the day they may be producing evidence against themselves.

The CVM reported that it is just trying to understand the roles and activities of these companies that can potentially deal with security tokens. “The work of communicating with institutions in the crypto ecosystem that potentially operate with securities is part of the thematic supervision” of the institution, it stated.

However, tokenization service providers might feel threatened by this probe, which according to another source with knowledge of the matter, “is a bit outside of normal procedure” due to its nature.

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