Brazil's CVM Pushes Mandatory Tokenization to Overhaul Market Surveillance

Brazil's top securities regulator is moving to make tokenization compulsory across its capital markets, framing the shift as a technological imperative rather than a policy choice. Otto Lobo, president of the Comissão de Valores Mobiliários — Brazil's equivalent of the U.S. Securities and Exchange Commission — argued that the country's fund industry has grown too large and complex for conventional surveillance tools to handle reliably.

The CVM oversees a fund ecosystem with a combined net worth of $2.32 trillion spread across more than 34,000 active structures. Lobo said the sheer scale of that market had rendered legacy monitoring systems obsolete, creating blind spots that only real-time, blockchain-anchored infrastructure could close.

"Tokenization is already transforming capital market infrastructure and brings relevant opportunities to increase efficiency, innovation, and access to new business models," Lobo said, signaling that the regulator views the technology as central to its long-term architecture rather than an experimental add-on.

The CVM is currently testing three different distributed ledger technologies to determine which framework best suits its oversight needs. The evaluation covers the creation of native digital assets and the ability to supervise tokenized instruments in ways that differ fundamentally from traditional reporting chains.

"We're already testing three DLTs, with the possibility of creating native digital assets, with the possibility of then overseeing that market in a very different way," Lobo stated, underlining that the regulator's ambitions go beyond settlement efficiency to reshape how the CVM monitors activity in real time.

A core plank of the proposal is embedding smart contracts directly into assets to automate anti-money-laundering compliance. Under the model being developed, AML checks would be applied at the asset level rather than reviewed after the fact, and final beneficiaries would be recorded digitally on every transaction, creating a continuous and tamper-resistant audit trail.

The move toward immediate, blockchain-based settlement is also designed to eliminate counterparty risk — a structural vulnerability in markets that still rely on settlement cycles that leave positions exposed between execution and clearing. Proponents of tokenized settlement argue the change could cut systemic risk materially at times of market stress.

On the access side, the CVM noted that tokenization has already begun lowering barriers for retail investors, with money market fund entry points falling to as little as $20. That democratization of capital market access is seen by regulators and industry as a parallel benefit to the oversight gains.

To support the expanded mandate, the CVM plans to add 1,200 employees in the coming years — a significant headcount increase that reflects the scale of work required to design, implement, and supervise a tokenized market infrastructure from the regulatory side.

Brazil's B3 stock exchange is building out its own tokenization platform to underpin some of these ambitions, with that system expected to be ready by 2027. The B3 timeline gives the CVM a concrete infrastructure milestone to build its phased rollout around.

The push positions Brazil among a small group of major economies moving from pilot programs toward mandatory or near-mandatory tokenization frameworks at the national level. How smoothly the CVM's three-DLT testing phase translates into a single production standard will be closely watched by regulators in other large emerging markets considering similar transitions.