“Brazil is home to the world’s fourth-largest investment fund industry, one with potential for expansion and greater prominence”

Elected on a five-year mandate in 2022, João Pedro Barroso do Nascimento is the Chairman of Brazil’s Securities and Exchange Commission, the CVM. In this exclusive interview, he discusses the CVM’s recent work in regulating crypto and other digital, and the state of the capital market in Brazil more generally.

Posted jeudi, septembre 28 2023
“Brazil is home to the world’s fourth-largest investment fund industry, one with potential for expansion and greater prominence”

How is the Securities and Exchange Commission of Brazil (CVM) addressing the regulation of cryptocurrencies and digital assets in the Brazilian financial market?


CVM is receptive to innovation and aspects that foster the development of the Capital Market, especially when well-crafted and structured in compliance with legislation and investor protection characteristics. On June 14th 2023, the Federal Government issued Decree 11.563/23, which determines that the Central Bank of Brazil is the regulator referred to in Law 14.478/22, which outlined the provision and regulation of virtual asset services. The Decree does not alter CVM’s powers, as the regulatory and supervisory authority for securities remains, regardless of the form of said securities.

Prior to the publication of the above decree and law, CVM formulated and released Opinion 40, which provides recommended guidelines to the market that aim to provide greater predictability and security for all, while at the same time contributing to investor protection and safeguarding savings. It also seeks to foster a favorable environment for the development of the crypto economy, adhering to relevant constitutional and legal principles.

Opinion 40 also spells out that CVM’s initial approach to crypto assets considered as securities will align with the principle of full and fair disclosure. The initial focus of the CVM is to prioritize transparency in relation to crypto assets, without disregarding the assessment of potential supplementary measures to come in.

What impact has this regulation had so far?
The subject is recent, but it’s already evident that participants in this sector have recognized the legislative and regulatory bodies’ intention is to shed light on the issue and generate opportunities for both issuers and investors. With a well-paved path, issuers feel prepared to conduct offerings, while investors start to observe a more transparent and promising landscape.

The Commission and the Central Bank have been working together at leadership level, recognizing that the crypto economy requires action from both within their respective spheres of competence.

It’s important to maintain open communication with the crypto market, especially with initiatives aiming to tokenize securities, to develop a regulatory framework increasingly suited to the characteristics of these assets.

How does CVM align with the growing adoption of financial technologies (Fintech) and automated trading platforms?
The Capital Market is becoming more sophisticated, utilizing systems that employ algorithms and artificial intelligence. It’s crucial to keep up with and make good use of these innovations, creating a legal security environment conducive to their growth and integrity.

To avoid dysfunction in the way the market operates, there needs to be appropriate utilization of these tools while preserving and ensuring the boundaries of action for regulated market agents authorized by CVM. CVM has maintained open channels with those interested in understanding, accessing and developing tools within the capital market’s scope.

In your assessment, how do new investment modalities impact the capital market?
In an ever-changing environment featuring disruptive technologies, new investment modalities can contribute to democratization, fostering social inclusion within the capital market itself. This democratization is synonymous with investor empowerment, giving them more rights and responsibilities. While investors receive more comprehensive content for decision-making, they also need to carefully evaluate such information.

The crypto economy could be another path for the country’s economic and social development, one of the four verticals CVM aims to highlight and explore in the Open Capital Market initiative, a set of opportunities for decentralizing the finance universe within CVM-regulated segments. There’s room alongside agribusiness, Football Anonymous Societies (SAFs), and sustainable finance. Brazil has a significant inclination toward sustainable finance and various sectors like the carbon market, for instance, have a global dimension and require harmonization and comparability.

According to the International Organization of Securities Commissions (IOSCO), Brazil is home to the world’s fourth-largest investment fund industry, one with potential for expansion and greater prominence. Data from the Brazilian Financial and Capital Markets Entities Association (Anbima) show that the investment fund industry closed the first half of 2023 with a positive balance of four million new investor accounts, topping 35.5 million accounts in total. This, coupled with positive returns from major fund types, pushed the industry’s net worth to R$7.75 trillion ($1.58 trillion).

What is the CVM doing to promote transparency and disclosure of environmental, social, and governance (ESG) criteria by publicly traded companies?


The capital market is attuned to the opportunities stemming from ESG themes, and CVM, as the regulator and developer of this market, has contributed to building a socially responsible and economically developed country. Providing information and disclosing reports involving environmental, social, and corporate governance aspects are connected to the concept of the "green and digital future."

Among CVM’s initiatives, special mention goes to the guidance provided in the annual Circular Letter from the Superintendence of Relations with Companies (SEP). The purpose of this letter is to promote coherent disclosure of information by publicly traded companies, in line with best corporate governance practices, in order to foster transparency and equity in investor relationships. This year’s document introduced a new reference form, arising from CVM Resolution 59, which introduced innovations regarding the informational regime of securities issuers, including ESG issues.

The new regulatory framework for investment funds - CVM Resolution 175, which comes into effect on October 2nd 2023 - highlights the use of terms related to sustainable finance in the nomenclature of funds whose investment policies aim to generate environmental benefits. The approach adopted for socio-environmental investments is non-invasive, adhering to practices of more developed markets, with a focus on providing information to investors and combating greenwashing.

The ESG agenda should be adopted by all those who believe in an increasingly democratic environment. It’s not a passing trend but a cultural seachange that comes with significant investment possibilities.