Brazil: Nominee to Lead the Securities Commission Pushes for More Control on the Crypto Markets

Brazil seems to be close to putting the brakes on its race to boost the cryptocurrency industry. After pushing hard for the legality of digital asset trading, the recent nominee to lead the CVM (Brazil’s equivalent to the U.S SEC) said that the country must have greater control and vigilance over this type of operations.

In recent statements, Otto Eduardo Albuquerque Lobo expressed his alarm at the growing interest of the people in cryptocurrency operations. He assured them that the CVM will pay “special attention” to digital assets.

Although there is a growing interest in cryptocurrencies, such asset class is not regulated by Brazilian law. However, Brazil was the first country in South America to approve a cryptocurrency ETF, which exceeded trading volume expectations on the same day it launched.

President Jair Bolsonaro proposed Otto Eduardo Albuquerque Lobo to head the CVM, and administrative procedures are almost ready for his authorization in the midst of a political crisis. The Economic Affairs Committee of the Federal Senate has already questioned him and approved his nomination on July 5, 2021.

A Change of Direction?

During his speech to the Country’s Senate, Otto Eduardo Albuquerque Lobo shared his displeasure regarding how the CVM had been behaving in the past in relation to the cryptocurrency market.

” One point that deserves special attention has to do with crypto-assets, which do not have regulation in the country. Nevertheless, this year the CVM authorized the negotiation of ETFs, index funds, of crypto-assets in Brazil.”

This is a bit of a departure from the stance of the current CVM president, Marcel Barbosa, who believes that regulators should not impede innovation. At a public event on September 11 last year, Barbosa told the media:

” New technologies push the frontiers of regulation (…) Our role is to learn with what is new and make sure that this innovation impacts the market without harming the situation of market participants (…) We are here to present papers that propose interesting debates on this point and suggestions on how to improve our sandobox, robo-advisors and cryptocurrency rules.”

During the role of the current president of the CVM, Brazil implemented a regulatory sandbox that included several projects that sought to apply new technologies (including blockchain and cryptocurrencies) to the field of public administration.

Why Brazil Matters

Currently, Brazil has two licensed crypto ETFs. QR Bitcoin (QBTC11) is a Bitcoin-only ETF managed by QR Asset Management and the Hashdex Nasdaq Crypto Index Fundo de Indice (HASH11) managed by Hashdex that tracks the performance of a basket of cryptocurrencies created by Nasdaq.

Similarly, several fintechs operate as cryptocurrency exchanges and allow their customers to use prepaid credit cards as long as people exchange their Bitcoin to fiat before purchases.

In all the cases mentioned above, cryptocurrency users must comply with the KYC requirements demanded by law and file tax returns on these operations. In other words, Brazil has clear control over the money movements of its citizens.

But Mr. Albuquerque wants more, and this new administrations could be key for the future of the crypto industry in the most powerful country in all of Latin America.