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Brazil’s Regulators Block Investment Funds From Investing In Cryptocurrencies

Brazil’s Regulators Block Investment Funds From Investing In Cryptocurrencies

Reading Time: 2 minutes by on January 16, 2018 Bitcoin, Commentary, News, Regulation

Local investment funds in Brazil can no longer invest in bitcoin or other cryptocurrencies. This restriction was imposed by the Securities and Exchange Commission of Brazil (CVM), which is currently believed to be in the process of crafting policy for crypto regulation.

Brazil Weighs In

The CVM issued a circular on January 12, 2018, asking all officials overseeing the management and administration of investment funds in the country to halt future investments in digital currencies until further notice. The circular mentions explicitly that any acquisition of crypto coins by investment funds henceforth “ is not allowed.”

One possible reason behind this move could be that cryptocurrencies, according to the CVM, do not fall into the category of financial assets, Reuters reports. Any local fund that wants to indirectly invest in virtual currencies by taking stakes in an overseas fund should wait for further clarification from the CVM, the circular advises. 

“We consider it appropriate for managers and investment funds to await further and more conclusive manifestation of this oversight on the subject to structure the indirect investment in cryptocurrencies as described, or even in other alternative forms that seek this kind of exposure to risk.”

Meanwhile, speculations indicate that Brazil’s regulators are preparing new guidelines to assert control over crypto trading. The Brazilian Chamber of Deputies formed a select committee in May 2017 to address the different aspects of regulating digital assets such as bitcoin. The discussions led to as many as seven public hearings in the second half of 2017.

As bitcoin’s unprecedented price surge continued through December last year, the CVM and the Central Bank of Brazil came up with a joint statement urging investors to consider the risks associated with virtual currencies.

Shortly after, House Representative Expedito Netto went a step further by asking an outright ban on mining, trading, and holding of bitcoin. Not only that, but Netto also recommended that all crypto to fiat conversions without legal permission should be barred. While Netto didn’t specify what he meant by “permission,” he proposed an extreme penalty of one to six months in prison or a monetary fine for violators.

Fortunately, not everybody was on board with Netto’s radical suggestions. As the Chamber of Deputies got together at a December public hearing, Jonatas Ramalho, executive manager of Banco do Brasil’s Digital Affairs Directorate, urged all stakeholders to craft a new set of rules to pave the way for a friendly environment for the use of bitcoin and other virtual currencies.

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