Brazilian Investment Funds Can Now Invest in Cryptocurrency
The Brazilian Securities and Exchange Commission (CVM) has implemented Resolution 175, allowing investment funds in Brazil to invest in cryptocurrency. This new regulation, which came into effect on October 2, opens up opportunities for institutions to explore the cryptocurrency sector. Investment funds can now allocate up to 10% of their portfolio to digital assets.
Rules and Limitations for Investment Funds
However, there are certain limitations imposed by the CVM. Investment funds can only purchase cryptocurrencies from exchanges approved by the country’s central bank or international regulatory bodies. This narrows down the options available for investment funds in Brazil.
According to Caio Sanas, a partner at Caio Sanas Lawyers, there are currently limited companies that meet the CVM’s requirements and have the necessary liquidity to supply Brazilian institutions with the desired crypto assets. Coinbase is one of the few exchanges that fulfill these requirements.
Legitimizing Institutional Interest in Cryptocurrency
The implementation of Resolution 175 is seen as a recognition and legitimization of institutional interest in cryptocurrency assets. Henrique Lisboa, a capital markets partner at VBSO Advogados, emphasized that this regulation demonstrates the CVM’s acknowledgment of investors and managers wanting to explore opportunities in the crypto-economy.
Limits for Market Protection
The limitation on available exchanges indirectly restricts the number of crypto assets that investment funds can purchase. This ensures that investment funds only invest in cryptocurrencies listed by approved exchanges. The 10% investment limit is also a protective measure for investors, preventing excessive exposure to market volatility.
Caio Sanas highlighted that this limit safeguards investors from potential losses similar to those experienced during FTX’s bankruptcy last year. He emphasized that the CVM’s role is to defend investors and ensure necessary precautions are in place.
Currently, investment funds have only allocated 1% to 3% of their portfolios to digital assets, indicating a cautious approach due to current market conditions.
Hot Take: Brazilian Investment Funds Embrace Crypto Opportunities
The implementation of Resolution 175 by the Brazilian Securities and Exchange Commission (CVM) marks a significant step in the integration of cryptocurrency into the investment landscape. Investment funds can now allocate a portion of their portfolios to digital assets, recognizing the growing interest in this sector.
While there are limitations and restrictions in place, such as purchasing cryptocurrencies from approved exchanges, this regulation ensures investor protection and market stability. The CVM’s proactive approach demonstrates its commitment to safeguarding investors while allowing them to explore the potential opportunities offered by cryptocurrencies.
With this new development, it is expected that more investment funds will enter the crypto market in Brazil, further driving growth and innovation in the sector.
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