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 the registration, custody, trading and settlement of securities using distributed ledger technology.
The group must send its first proposal to the CVM’s board within 60 days of being formally installed, while a broader review will run for 120 days, with a possible 30-day extension.
The group brings together 14 CVM departments and may consult government agencies, market associations, self-regulatory bodies and outside specialists. It will also review cybersecurity risks, international regulatory models and results from earlier sandbox programs, the regulator said.
Brazil already applies securities law according to a token’s economic characteristics. The CVM’s 2022 guidance clarified that using blockchain does not change whether an asset qualifies as a security.
The new review will focus on what happens around the asset.
Blockchains can combine functions that are normally split between exchanges, custodians, registrars, depositories and settlement systems. That raises questions over who controls the official ownership record, how private keys are held, when transactions can be reversed and who is liable when systems fail.