The Brazilian Securities and Exchange Commission (CVM) issued, on September 19, 2018, new understandings and recommendations1 about whether it is possible for funds to to invest in cryptocurrency.

CVM has acknowledged that the authorization to international investments2 also includes the possibility of investments in cryptoassets, as long as they are made abroad.

The investments must be made:

1. indirectly by, for example, acquiring shares of investment funds or other permitted assets regulated in the traded markets; and

2. in compliance with certain specific practices of diligence by administrators, managers and independent auditors of the investor fund.

The objective of these practices is to protect the funds' shareholders and give them notice that there are specific risks related to investments of this nature. Additional practices should be adopted in relation to those which apply to cases in which the fund invests in regular assets.

In the table below, we present the main risks identified by the Official Letter, a brief explanation and the practices that may be adopted by administrators, managers and independent auditors so they comply with their duty of diligence:


1 Via CVM/SIN Official Letter 11/2018 ("Official Letter") to supplement Official CVM/SIN Letter 1/2018, which provided on the possibility and conditions for investments in cryptoassets by investment funds regulated by CVM Instruction No. 555.

2 Articles 98 and following of CVM Instruction No. 555.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.