Brazil Pushes Mandatory Tokenization for Fund Market

Brazil is taking a major step toward modernizing its financial system. The country's main securities regulator wants to make asset tokenization mandatory for investment funds.

Why is this shift happening now? Brazil's investment fund market has grown too big for traditional tracking tools. Figures from financial publication Valor Econômico show the country's fund industry now holds $2.32 trillion in net worth across more than 34,000 active structures.

Why Old Market Tracking Methods Need an Upgrade

Otto Lobo is the president of Brazil’s Comissão de Valores Mobiliários (CVM), the country's equivalent of the U.S. Securities and Exchange Commission. He explained that legacy oversight tools are no longer practical for a market of this size.

Monitoring tens of thousands of active funds using traditional manual methods creates blind spots and delay. To fix this, the CVM is combining mandatory tokenization with artificial intelligence (AI) surveillance.

This upgrade is made possible by a recent Supreme Court ruling. The court allowed the CVM to retain 70% of its inspection fee revenue. Thanks to this funding, the agency plans to hire 1,200 new employees in the coming years to support modern market oversight.

How Tokenization and Smart Contracts Help

Tokenization turns traditional financial assets into digital tokens on a distributed ledger technology (DLT) network. DLTs offer several key benefits over old paper-and-database systems.

First, digital ledgers allow instant trade settlements. This eliminates counterparty risk, which is the risk that one party fails to deliver their part of a trade. Second, digital ledgers record a continuous audit trail. This trail clearly shows who ultimate beneficiaries are for every transaction.

In addition, smart contracts can automate compliance rules right at the asset level. Requirements like Know-Your-Customer (KYC) and Anti-Money Laundering (AML) checks can be built directly into token code, simplifying regulatory checks.

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.

Lowering Costs for Everyday Investors

This regulatory shift is not just about catching bad actors. It also aims to lower costs for retail investors.

Because tokenized assets reduce administrative work, initial entry barriers fall dramatically. CVM estimates show that minimum entry costs for money market funds could drop to as low as $20.

This lower price point could open formal investment markets to millions of new customers who were previously priced out.

Pilot Testing and Brazil's 2027 Roadmap

Before launching mandatory rules across the board, the CVM is testing the technology carefully.

A special CVM tokenization working group is running pilot programs across three DLT networks. This lets officials map out smart contract logic and address potential cybersecurity risks before a full rollout.

Tokenization is already transforming capital market infrastructure and brings relevant opportunities to increase efficiency, innovation, and access to new business models.

Private market infrastructure is moving in parallel. B3, Brazil’s main stock exchange, is building its own tokenization platform. The exchange plans to have this service ready by 2027, running side-by-side with traditional securities so both systems can share liquidity.

Support From Brazil's Central Bank

The CVM is not acting alone. The Central Bank of Brazil is also championing tokenization and open finance as foundational elements for the country's future financial network.

Central bank leaders recently presented their vision for tokenized asset infrastructure before global financial institutions, including the IMF and the World Bank.

While tokenized systems promise higher speed and transparency, regulators stress that thorough testing remains vital to safeguard market stability as adoption grows.