Brazil’s Securities Commission, CVM, released new market guidance on so-called fixed income tokens this Tuesday (4). These assets are regarded as securities by the regulator.
Circular CVM/SSE 4/2023, organized by the Superintendence of Securitization Supervision (SSE), guides service providers involved in the tokenization activity on the characterization of Receivables Tokens, or Fixed Income Tokens (TR), as securities.
The document also clarifies certain public offers for the distribution of TR that can be made under the terms of the regime provided by CVM Resolution 88.
Fixed income tokens are securities, concludes CVM
According to Bruno Gomes, Superintendent of Securitization Supervision at CVM, the new circular 4/2023 addresses what the tokens are like and how they are offered.
Thus, the document arrives to avoid possible irregularities or misconduct. For the superintendent, tokenizers or cryptocurrency brokers who issue tokens should try to talk to the regulator.
“The circular addresses the current structures of receivables and fixed income tokens that are or are under supervision. They are increasingly offered on platforms (exchanges or tokenizers) with the appeal of investments, which are essential for the guidance of the technical field on the subject, to reduce possible irregularities and misconduct. Our clarifications were also based on Guidance Opinion 40, in which the CVM consolidated understanding about the application of securities regulation to crypto-assets.”
The CVM reminds that if the tokens are labeled as securities, the rules for registration of issuers and for public offerings must be respected. In addition, there are clear rules on the intermediation, accounting, custody, centralized deposit, registration, clearing, settlement and management of an organized securities trading market.
Tokens were issued by companies without proper credentials
CVM’s technical department discovered issues and public offers of TR that had characteristics of securities, without complying with the rules applicable to the capital market.
Bruno Gomes explains that, subject to certain requirements, such tokens can be classified as securities, either by complying with the concept of a collective investment agreement (CIC), of Law 6.385, or of a securitization operation, of Law 14.430. “If the tokens are labeled as securities, the issuer registration and public offering rules must be respected‘ said the Chief Inspector.
“In these cases, we understand that there is a securitization operation which, if publicly offered, is equivalent to, for example, the certificate of claim, as provided for in the legal framework for securitization.”
It is worth noting that the nature of a security will remain where the expectation of economic benefit arises from the effort of the entrepreneur or third party, e.g. transferor, principal, exchange, consultancy or other structurer, in accordance with the other requirements of the Howey Code. test, or where there is a de facto equivalence to the economic essence of the securitization.
Tokens on crowdfunding platforms
According to Luis Lobianco, CVM’s Securitization Supervision Manager (GSEC-2), securitization bonds issued by private securitization companies can be “tokenized” and offered through crowdfunding platforms.
“This would allow the tokens’ technology to be compatible with that used in the platforms’ infrastructure, given the special regulatory regime of CVM Resolution 88, which waives the need to lease traditional capital market infrastructure in certain situations. ”
According to the SSE, TR offerings of up to R$15 million can be made compatible with the regulatory model of notes or other securities for securitization, provided for in Law 14.430, and for crowdfunding, which can be issued by companies Securitization companies not registered with the CVM and conducted through platforms registered under CVM Resolution 88, provided that the same requirements set forth in said law and resolution are met. The information comes from the CVM.
Liqi CEO says he is pausing new token offerings, awaiting response from regulators
Livecoins reached out to Liqi’s Daniel Coquieri to understand how the new guidelines affect the tokenizer business.
“It is positive that CVM is taking a position, obviously the current position of the official letter on tokens has a major impact on the operation of Liqi. In fact, we are pausing all new offerings and have been trying to dialogue with the CVM about these new tokenization structures, trying not to include tokenization in the current regulations, because the current regulations are not built for tokenization and blockchain technology. So what I think is that there needs to be a dialogue between the regulator and the market to have an increasingly clear understanding of what can be done or what needs to change in regulation so that innovation continues to happen.”
Daniel still remembers sending a technical report to the CVM, prepared by the law firms Pinheiro Neto and the VBSO, in which they argue that the tokens are not securities. Six months later, the Liqi company is still awaiting responses from the regulator.
Going forward, the CEO of the tokenizer believes that the regulator should talk to the market and reach a common denominator, without hindering innovations in the country.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
