> For the complete documentation index, see [llms.txt](https://www.opensourcelaw.com.br/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://www.opensourcelaw.com.br/en/regulation/1.-cvm/1.1.-cvm-guidance-opinion-no.-40-2022.md).

# 1.1. CVM Guidance Opinion No. 40/2022

Provides for cryptoassets and the securities market.

The [Opinion](https://conteudo.cvm.gov.br/legislacao/pareceres-orientacao/pare040.html) consolidates the CVM's understanding of the rules applicable to cryptoassets that are considered securities, in order to contribute to the protection of investors and public savings, the prevention and combating of money laundering, terrorist financing and/or proliferation of weapons of mass destruction, and corruption, as well as the control of tax evasion.

The Opinion refers to the Financial Action Task Force (FATF), which is why it is important to follow the guidance of this international organization established by the G7. It also refers to the International Organization of Securities Commissions (IOSCO), the United Kingdom's Financial Conduct Authority (FCA), and the Markets in Crypto-Assets (MiCA), a regulation issued by the European Union.

{% hint style="warning" %}
Although tokenization itself is not subject to prior approval or registration with the CVM, if security tokens are issued for public distribution purposes, both issuers and the public offering will be subject to regulation, as will the services of intermediation, book-entry, custody, centralized depository, registration, clearing, and settlement of transactions.
{% endhint %}

## Definitions:

* Cryptoassets: are digital assets, protected by cryptography, that can be the object of transactions executed and stored through distributed ledger technologies (Distributed Ledger Technologies – DLTs).
* Tokenization: the process of digitally representing an asset or ownership of an asset.
* Payment Token: seeks to replicate the functions of money, notably as a unit of account, medium of exchange, and store of value;
* Utility Token: used to acquire or access certain products or services; and
* Asset-Referenced Token: represents one or more assets, tangible or intangible. Examples are security tokens, stablecoins, and non-fungible tokens (NFTs).

{% hint style="info" %}
The same cryptoasset may fall into more than one category depending on the functions it performs and the rights associated with it.
{% endhint %}

## Security:

A cryptoasset will be considered a security if:

* it is the digital representation of any of the securities under [Law No. 6,385/1976](/en/legislation/5.-securities-law.md);
* it is the digital representation of receivables certificates in general, pursuant to [Law No. 14,430/2022](/en/legislation/6.-credit-rights-law.md);
* it is publicly offered and grants a right to participation, partnership, or remuneration in returns arising from the efforts of the entrepreneur or third parties in collective investment contracts; and
* it is a derivative, regardless of the underlying asset.

{% hint style="info" %}
The CVM applies the Howey Test to assess whether a given cryptoasset is a security or not.
{% endhint %}

## Howey Test:

The CVM has considered the following characteristics in its analysis to determine whether a cryptoasset is a security:

* Investment: contribution of money or an asset capable of economic valuation;
* Formalization: existence of a title or contract between the investor and the offeror, regardless of the form adopted;
* Collective investment character;
* Expectation of economic benefit: which may arise through a right to some form of participation, partnership, or remuneration, receipt of dividends;
* Effort by the entrepreneur or a third party: the economic benefit results from the predominant actions of a third party other than the investor, including for purposes of promoting the offering; and 
* Public offering: which may take place via the internet, for example, even if the page is restricted to users identified by login and password.

## Obligations:

Inspired by the principle of the *full and fair disclosure* of the U.S. Securities Act of 1933, the principle of full and fair disclosure requires the transparent disclosure of information about the issuance of cryptoassets representing securities, and the following must be carried out:

* registration and periodic disclosure of information, pursuant to [CVM Resolution No. 80/2022](/en/regulation/1.-cvm/1.2.-cvm-resolution-no.-80-2022.md) and the [CVM Resolution No. 88/2022](/en/regulation/1.-cvm/1.3.-cvm-resolution-no.-88-2022.md);
* the disclosure of information on primary and secondary public offerings of the cryptoassets.

The CVM presents the following <mark style="background-color:purple;">whitepaper recommendations</mark>, which must be provided in language accessible to the public and the market in general.&#x20;

* identification of the issuer and all participants in the offering;
* description of the issuer's activities or of a third party whose efforts are relevant to the expectation of economic benefit;
* description of the rights granted to token holders;
* information supporting expectations of economic benefit;
* mechanisms and dates related to the issuance of the token;
* support materials on the functions and risks of the technology (impermanent loss, for example);
* identification of investor support channels;
* any fees to be paid by the investor for the acquisition and ownership of the token;
* identification of the advantages of using distributed ledger technology;
* description of the management of token ownership (especially if the investor may have control of the private key);
* protocol governance rules;
* description of the rules for <mark style="background-color:purple;">KYC and</mark> [<mark style="background-color:purple;">personal data processing</mark>](/en/legislation/4.-general-data-protection-law.md);
* indication of <mark style="background-color:purple;">AML/CFT</mark>;
* partner due diligence.