Brazil CVM Tokenized Fund Regulation

Brazil’s Leadership in Emerging Market Fund Tokenization

Brazil’s Comissao de Valores Mobiliarios (CVM), the country’s securities regulator, has established one of the most advanced fund tokenization frameworks among emerging market economies. CVM Resolution 175 (December 2022, effective October 2023) modernized Brazil’s fund regulatory framework, including explicit provisions that enable tokenized fund share issuance and settlement using distributed ledger technology.

Resolution 175 Framework

Resolution 175 replaced a patchwork of fund regulations with a comprehensive framework governing all categories of Brazilian investment funds. Key provisions relevant to fund tokenization include:

Technology neutrality: The resolution adopts a technology-neutral approach to fund share registration, permitting fund administrators to use any technology — including DLT — for maintaining share registers, provided that the technology satisfies accuracy, security, and auditability requirements.

Digital asset eligibility: Resolution 175 expanded eligible fund assets to include “crypto-assets” for funds marketed to qualified investors, enabling Brazilian funds to invest in Bitcoin, Ethereum, and other digital assets. This eligibility expansion, combined with tokenized share issuance capabilities, enables fully on-chain fund products where both the portfolio and the wrapper are blockchain-native.

Qualified investor requirement: Tokenized fund products and funds investing in crypto assets are limited to qualified investors (individuals with BRL 1 million+ in financial assets or institutional investors), providing investor protection through eligibility restrictions rather than product prohibition.

Institutional Adoption

Brazilian financial institutions have rapidly adopted tokenized fund capabilities following Resolution 175. Leading examples include:

Itau Unibanco: Brazil’s largest private bank launched a tokenized fixed-income fund platform using its own blockchain infrastructure, targeting institutional cash management.

BTG Pactual: The investment bank’s digital asset platform has issued tokenized real estate and infrastructure fund products, leveraging Resolution 175’s expanded eligible asset provisions.

B3 (Brasil Bolsa Balcao): Brazil’s stock exchange operator has developed DLT infrastructure for tokenized securities settlement, complementing its traditional CSD operations.

Drex (Brazilian CBDC) and Fund Settlement

Brazil’s central bank digital currency project, Drex (formerly the Digital Real), includes fund settlement as a priority use case. The Central Bank of Brazil’s Phase 2 Drex pilot (launched October 2024) tests tokenized fund share purchase and redemption using wholesale CBDC, enabling atomic settlement that eliminates the settlement risk and delay inherent in traditional fund operations.

The Drex fund settlement trials parallel the ECB’s wholesale CBDC experiments and Singapore’s 2026 CBDC pilot (with DBS, JPMorgan, and Standard Chartered, part of Project Guardian’s expansion to 40+ institutions) but operate within a jurisdiction where fund tokenization regulatory authority already exists. This alignment of payment infrastructure and fund regulation positions Brazil as a potential model for emerging market fund tokenization.

Regulatory Comparison

Brazil’s approach offers lessons for other emerging markets developing tokenized fund regulation. The combination of: explicit legislative authority (Resolution 175); qualified investor restrictions as the primary protection mechanism; and CBDC integration for settlement infrastructure creates a comprehensive framework that balances innovation with investor protection.

The comparison of regulatory approaches positions Brazil alongside Singapore and Switzerland as jurisdictions that have achieved regulatory clarity for tokenized fund products, contrasting with the more tentative approaches in the US and EU.

CVM’s Technology Neutrality Principle in Practice

Resolution 175’s technology-neutral stance has specific operational implications that differentiate Brazil’s approach from jurisdictions that prescribe particular blockchain platforms or technical architectures. Fund administrators in Brazil can select any DLT infrastructure — public chains such as Ethereum, Polygon, or Solana, or permissioned networks such as Hyperledger Fabric — provided they satisfy CVM’s operational requirements:

Data integrity and auditability: The blockchain-based share register must produce an auditable record of all issuance, transfer, and redemption events. CVM expects fund administrators to demonstrate that the on-chain record is tamper-resistant and can be independently verified by auditors and the regulator. This mirrors the on-chain fund administration architecture requirements emerging across multiple jurisdictions.

Operational resilience: Fund administrators must maintain business continuity plans that address DLT-specific risks, including network outages, consensus failures, and smart contract vulnerabilities. CVM Instruction 558/2015 (as amended) requires fund administrators to have disaster recovery capabilities for all technology systems supporting fund operations.

Cybersecurity standards: CVM Resolution 35/2021 establishes cybersecurity requirements for regulated entities, including fund administrators. For tokenized fund operations, these requirements extend to private key management, smart contract access controls, and DLT node security. Fund administrators must report cybersecurity incidents to CVM within 24 hours.

Brazilian ETF Market Context

Brazil’s ETF market has grown substantially, reaching approximately BRL 80 billion (approximately USD 16 billion) in assets under management across over 100 ETFs listed on B3. Brazilian ETFs include equity index trackers, fixed-income products, and — uniquely among emerging markets — crypto asset ETFs. The CVM approved the first Brazilian Bitcoin ETF (Hashdex HASH11) in April 2021, predating the US spot Bitcoin ETF approvals by nearly three years.

This early crypto ETF approval demonstrates the CVM’s willingness to authorize innovative fund products, providing regulatory precedent for the subsequent tokenization framework under Resolution 175. Brazilian crypto ETFs have attracted significant retail investor interest, with combined assets exceeding BRL 10 billion.

The intersection of Brazil’s crypto ETF experience and Resolution 175’s tokenization provisions creates a pathway for tokenized crypto ETF products — ETFs with crypto-asset portfolios distributed through tokenized share classes settled on-chain. This fully blockchain-native fund product category does not yet exist in any jurisdiction but is technically feasible under Brazilian regulation.

Custodial Infrastructure and Requirements

CVM Resolution 175 requires that fund assets — including tokenized fund shares — be held by qualified custodians. In Brazil, major custodians include Itau Unibanco, Bradesco, and B3’s Central Securities Depository. For tokenized fund products, custodial requirements encompass:

• Segregated wallet management for each fund, ensuring that tokenized shares of different funds are not commingled in custodian-controlled wallets.
• Multi-signature authorization protocols for token transfers, preventing unauthorized issuance or movement of tokenized fund shares.
• Integration with B3’s settlement infrastructure, enabling interoperability between tokenized and traditional fund settlement systems.
• Insurance or guarantee arrangements covering digital asset custody risks, including key loss, unauthorized access, and smart contract failure.

Brazilian banks have invested heavily in digital asset custody capabilities, driven by both the crypto ETF market and the Drex pilot program. Itau’s digital asset custody platform, launched in 2024, supports custody of tokenized securities including fund shares, providing institutional-grade custody infrastructure that fully meets CVM operational and security requirements.

The qualified custodian requirements analysis examines how Brazilian custodial standards compare with those in the US, EU, and Hong Kong.

Cross-Border Distribution Considerations

Brazilian tokenized fund products face distribution constraints in international markets. Resolution 175 governs funds domiciled in Brazil and sold to Brazilian investors; cross-border distribution of tokenized fund shares requires compliance with host jurisdiction requirements. For fund sponsors targeting global distribution:

• EU market access: Brazilian funds cannot passport into the EU. Distribution requires compliance with national private placement regimes or AIFMD third-country rules. The tokenized nature of fund shares adds complexity, as the MiFID II distribution rules may impose additional requirements on the distribution of tokenized fund products.
• US market access: Brazilian tokenized funds cannot be offered to US investors without SEC registration or an applicable exemption (Rule 506(b) or 506(c) for private placements to accredited investors). The SEC’s custody rules impose further requirements on the custody of tokenized fund assets.
• Asia-Pacific markets: Distribution to professional investors in Hong Kong and Singapore may be feasible under private placement exemptions, though the tokenization element adds regulatory complexity.

Lessons for Other Emerging Markets

Brazil’s experience under Resolution 175 offers a model for other emerging market jurisdictions developing tokenized fund regulation. The key elements of Brazil’s success include: legislative initiative (Resolution 175 was drafted with tokenization in mind, not retrofitted); institutional commitment (major Brazilian banks adopted tokenized fund products within months of Resolution 175’s effective date); CBDC integration (the Drex program provides settlement infrastructure purpose-built for tokenized securities); and graduated investor protection (qualified investor restrictions allow market development while protecting retail investors).

Jurisdictions including Mexico, Colombia, Chile, and Argentina have studied the CVM’s approach. The regulatory sandbox approaches comparison examines how Brazil’s legislative approach differs from the sandbox model preferred by Singapore and the UAE.

Secondary Market Infrastructure for Tokenized Fund Products

Brazil’s secondary market infrastructure for tokenized fund products is developing through both traditional exchange-operated venues and blockchain-native platforms:

B3 Digital Infrastructure: B3 has invested in DLT-based settlement capabilities that complement its traditional CSD operations. B3’s digital securities platform enables the listing and secondary trading of tokenized fund shares issued under Resolution 175, providing regulated venue access for institutional and qualified investors. B3’s infrastructure ensures settlement finality under Brazilian law and provides the regulatory reporting capabilities required by the CVM.

Private tokenization platforms: Several private platforms — including Liqi Digital Assets, Vortx QR Tokenizadora, and Mercado Bitcoin’s MB Digital Assets — offer tokenization and secondary trading services for fund products. These platforms operate under CVM registration and provide qualified investor access to tokenized fund shares through digital-native distribution channels.

Drex integration with secondary markets: The Drex pilot program’s Phase 2 includes secondary market settlement use cases, testing the settlement of tokenized fund share trades using wholesale CBDC. This integration would enable real-time settlement of secondary market fund transactions, eliminating the T+1 settlement delay that currently applies to fund share trades on B3’s traditional infrastructure.

Comparison with EU MiCA and US Approaches

Brazil’s Resolution 175 framework differs structurally from both the EU’s MiCA regime and the SEC’s implicit-acceptance approach. Unlike MiCA, which creates a comprehensive CASP authorization framework separate from fund regulation, Resolution 175 integrates tokenization provisions directly into fund regulation — avoiding the dual-authorization complexity that EU fund sponsors face. Unlike the SEC, which has not issued formal tokenized fund guidance, the CVM provides explicit legislative authorization that reduces legal uncertainty.

The CVM’s Drex-based settlement model also distinguishes Brazil from jurisdictions relying on private stablecoins or wholesale CBDC trials. While the ECB’s wholesale CBDC experiments remain in pilot phase and the US Federal Reserve has not announced a wholesale CBDC timeline, Brazil’s Drex is on track for production deployment — potentially making Brazil the first major economy with operational CBDC-based tokenized fund settlement.

The CVM has also established a regulatory technology (regtech) initiative that leverages blockchain data for automated supervisory monitoring of tokenized fund products. The CVM’s supervisory platform ingests on-chain transaction data from tokenized fund smart contracts, enabling real-time monitoring of fund operations including subscription/redemption volumes, NAV calculations, and investor eligibility compliance. This supervisory technology capability — developed in partnership with B3’s digital infrastructure team — positions the CVM as one of the most technologically advanced emerging market regulators for tokenized fund oversight.

Brazil’s approach to tokenized fund regulation has attracted attention from other Latin American regulators, including Mexico’s CNBV, Colombia’s SFC, and Chile’s CMF, each of which has initiated consultation processes referencing Resolution 175 as a regulatory model. The CVM’s willingness to share regulatory expertise through IOSCO coordination channels has accelerated regional regulatory development, potentially creating a Latin American corridor for cross-border tokenized fund distribution. Brazil’s regulatory leadership is particularly notable given the global context: the tokenized treasury market has reached $11.70 billion across 73 products and 55,520 holders by March 2026, led by BlackRock’s BUIDL ($2.01 billion); 155 crypto ETP filings covering 35 tokens are pending SEC review in the US; and the EU has authorized 53+ MiCA CASPs with its DLT Pilot Regime extended through December 2025 to broaden institutional testing. Hong Kong’s ChinaAMC tokenized money market ETF has reached $546.1 million as Asia-Pacific’s first retail-accessible tokenized fund, while Singapore’s Project Guardian now encompasses over 40 financial institutions conducting institutional-grade tokenized fund pilots.

For fund sponsors operating across multiple jurisdictions, Brazil’s approach offers a faster path to market than the EU (where MiCA CASP authorization adds 6-12 months to launch timelines) or the US (where the absence of explicit guidance creates regulatory uncertainty). The SEC vs. ESMA comparison provides context for evaluating Brazil’s framework against Western regulatory approaches. ESMA is monitoring Brazil’s experience as a data point for its own tokenized fund policy development. The smart contract audit guide covers audit requirements applicable across all three jurisdictions.

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