Brazil Moves Ahead With DLT Pilot for Securities Tokenization

Brazil's financial authorities are moving ahead with a pilot program for securities tokenization using distributed ledger technology, or DLT. The initiative will test whether DLT can be applied across capital-markets functions, from issuance and trading to custody and settlement, with the results to be used to refine related regulations.

Brazil's Securities and Exchange Commission, known as the CVM, said on September 18 that its tokenization working group had recently submitted to the board a draft resolution setting out how the DLT pilot program would operate. The proposal is awaiting board approval.

The pilot will test securities issuance, public offerings, distribution, trading, ledger management, custody, central depository functions and settlement through DLT networks. No actual securities or investors will participate. Instead, the program will use simulated transactions to assess how the technology and regulatory framework would function in practice.

Assets that may be included in the test range from stocks and corporate bonds to securitized receivables and fund units. Other investment products, including collective investment contracts, may also be added if needed.

The program will run for 60 days and may be extended by up to 30 days if technical issues arise or additional verification is needed. The CVM plans to connect directly to the selected test networks and monitor transaction records in real time.

Bruno Gomes, the CVM official overseeing securitization and agricultural finance, said the agency gathered input from a range of market participants to avoid limiting the scope of the test to any single technology. He added that the pilot was designed in a way that would not hinder future technological innovation.