The Securities and Exchange Commission (CVM), through the Financial Innovation Laboratory (LAB), is advancing in the debates on cryptocurrencies and decentralized finance (DeFi). At the forefront of the initiative is the Fintech Working Group, which has been working on two lines of action. The first is Market Infrastructure and the second is Digital Identity. Work is carried out through the new Innovation and Market Solutions Subgroup. As highlighted by the CVM, each of the fronts foresees deliveries that include the structuring of theoretical materials, pilots and prototypes. According to the autarchy, the objective of the initiative is to promote the study, analysis and development of models and structures in the financial and capital markets that use crypto assets and functionalities and models adopted by the DeFi sector. CVM’s idea is also to preserve investor protection, market efficiency and other objectives of national regulation. “The conceptual models and structures also have the final purpose of enabling the creation and development of prototypes in the Brazilian financial and capital market,” highlighted the CVM.
Market Infrastructure
Regarding the first front of action, the CVM informed that the members of the LAB are revisiting the roles and functions of the infrastructures of traditional financial markets in the face of new technologies. This includes, for example, distributed ledger, DeFi and cryptocurrency protocols. The idea, according to the CVM, is to identify the new challenges and issues in this new scenario. In addition, members will suggest possible alternatives, responses and potential legal frameworks.
Digital Identity
Meanwhile, the Digital Identity front will focus on the opportunity for a favorable insertion of Brazil in Web 3.0. As informed by the CVM, this work front works with the perspective of analyzing and proposing solutions for the application of self-sovereign digital identity solutions focused on the user. This applies to both natural and legal persons, within the scope of operations in the financial system and in the capital market.
Next steps
In addition to the two fronts in question, the CVM also foresees two more thematic work fronts. One of them is the Legal front (on registration, notary and contractual law) and the other is on Issuers (on tokenized companies). According to the autarchy, these fronts will help to increase the automation, efficiency, transparency, resilience and cost-effectiveness of typical activities in the financial and capital markets through the use of DLT. In addition, the initiative will benefit issues related to open banking, data protection and greater financial inclusion. “The infrastructure of the financial and capital markets of the future depends on blockchain technology. This is why the Decentralized Finance initiative coordinated by the Financial Innovations Laboratory is so important. There we debate and study how this future and the present meet”, highlighted Bernardo Srur, director of ABCripto and one of the leaders of the initiative.