On November 16, the Central Bank of Brazil (Bacen) issued Communiqué No. 31,379/17 on the risks involved in the custody and trading of virtual "currencies". To a large extent, the text emphasizes the risks previously indicated in 2014 through Bacen Communiqué No. 25,306 (such as the risk of sudden changes in the price of virtual currencies and their potential use for unlawful activities). However, the new communiqué addresses two points not previously mentioned: exchanges (companies that offer trading, post-trading, and custody services for virtual assets) and international transfers using virtual currencies.

 

Initially, Communiqué 31,379/17 reports that exchanges "are not regulated, authorized, or supervised by the Central Bank of Brazil" and that Bacen "does not regulate or supervise transactions with virtual currencies".

 

The Brazilian Securities and Exchange Commission (CVM), on the other hand, recently reaffirmed its jurisdiction over virtual assets that are considered securities (as defined in article 2 of Law No. 6,385/76, which regulates the Brazilian securities market) and exchanges that render services related to virtual assets characterized as securities.

 

In a note issued on October 11, 2017, on Initial Coin Offerings (ICOs), CVM stated that "virtual assets, depending on the economic context of their issuance and the rights conferred on investors, may constitute securities" and that "ICO transactions may be characterized as transactions with securities already subject to specific legislation and regulation". Also, in a Frequently Asked Questions (FAQ) published on November 16, 2017, CVM reports that "when the virtual asset is a security, the exchanges should seek specific registrations" with it.

 

However, with regard to virtual assets other than securities (and exchanges that provide services related to such assets), there are still gaps and regulatory uncertainties. Pursuant to the provisions of paragraph 1 of article 3 of Law No. 6,385/76, financial and capital markets supervision shall be exercised by Bacen, with the exception of the specific competencies of CVM. Therefore, it is to be expected that, in due course, Bacen will position itself more concretely with respect to transactions involving virtual currencies and activities conducted by exchanges.

 

Regarding international transfers involving virtual currencies, Bacen emphasizes that they should be carried out exclusively through institutions authorized to operate in the foreign exchange market, thus removing doubts about the possibility of using virtual currencies as an indirect medium for the purchase of foreign currency without the closing of a foreign exchange transaction with an authorized institution.

 

It is important to note that this situation bears similarities to the so-called blue-chip swap transactions, which involve acquisition by a party located in Brazil of high liquidity securities, normally traded in the international market through payment in Brazilian reais in Brazil, for subsequent use of such assets in fulfilling obligations abroad. These transactions were repeatedly considered to be violations of foreign exchange regulations and punished in accordance with applicable legislation.

 

In line with what it affirmed in 2014, Bacen reports that, to date, no significant risks have been observed for the National Financial System related to virtual currencies and that it will remain attentive to the evolution of the use of these instruments in order to adopt any necessary measures.