Brazil’s securities watchdog schedules tokenization pilot for 2024

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Tokenization is the process of transferring ownership rights of a real-world asset into digital tokens. Real-world assets that can be tokenized include financial products like stocks, bonds, equities, debt, and even real estate.

In its earlier iteration, the CVM explored technical details and a handful of use cases in a process that led to the tokenization of over R$185 million (US$36 million) worth of assets. In the future, the securities watchdog disclosed that the second pilot, scheduled for 2024, will experiment with broader use cases.

“We do not define specific cases because we want to let innovation reach the CVM without prior limitations,” said Maeda. “But some areas for the application of tokenization certainly catch our attention, such as agribusiness and [environmental, social and governance].”

The Brazilian securities watchdog stated that it is leaning on blockchain technology for its tokenization pilot, given its benefits including improved efficiency, costs, and transparency while reducing the entry threshold through fractionalization.

“What I can say is that we, at CVM, saw many benefits in this market to leverage processes,” Maeda said. “Through tokenization, the investor gains in transparency and lower costs, in addition to increasing the democratization of investments, which are values that the commission carries.”

Maeda remarked that the CVM will hold back regarding the launch of a second round of tokenization pilot pending clarity over the country’s handling of digital assets. It appears the CVM is waiting for the Brazilian central bank to gain significant ground with its central bank digital currency (CBDC), hinting at a greater collaboration between both regulators.

Back in June, a new digital asset legal framework was signed into law, splitting regulatory power between the central bank and the CVM.

Tokenization in Southeast Asia

Hong Kong has taken the lead in blockchain-powered tokenization after confirming the completion of Project Evergreen, a tokenized bond issuance initiative. In the 24-page report, Hong Kong’s Monetary Authority (HKMA) disclosed that the project “showed the potential in DLT to enhance efficiency, liquidity and transparency in bond markets.”

The Bank of France stated that all attempts to roll out CBDCs must be carried out with the broader objective of asset tokenization. Deputy Governor Denis Beau charged central bankers to ensure that CBDCs become the de facto settlement method for tokenized transactions to get ahead of stablecoins and other privately issued virtual currencies.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Tokenized was built with blood, sweat and tears