Brazil’s financial markets regulator, the Securities and Exchange Commission (CVM), has banned the influential crypto exchange Binance from offering derivative products in the country.
The Brazilian commission said derivative referencing cryptocurrencies, or any other underlying assets, are deemed securities, and thus Binance should seek its authorization to offer such products. Binance, however, does not hold such a regulatory license to act as a securities intermediary in Brazil.
The notice reflects increasing investor interest in trading derivatives which let traders make bets on the price of cryptocurrencies without the need for actual delivery.
The warning also comes as most major crypto venues are setting their sights on popular crypto derivatives offerings on the market, such as BitMEX. Binance, for example, has rolled out margin trading functionality, although it is starting with a conservative approach and capping leverage at 3x.
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Binance’s offering aims to create a crypto-derivatives market that mimics the traditional markets in infrastructure. To push the wave of crypto-adoption within the derivatives realm, it mainly focuses on structured investments products whose value is linked to the performance of underlying cryptocurrency markets.
Brazil is a hive of cryptocurrency activity
Brazilians have not missed the cryptocurrency trend and the country has been a hive of activity related to crypto assets. Within Latin America, the nation was the cryptocurrency ringleader both on the regulatory side and on the development side. As it now stands, the country’s financial watchdog, the CVM, bans regulated investment funds from trading in the virtual asset class.
Brazil’s move towards cryptocurrency regulation took a step closer last year after the country’s parliament established a commission to consider the matter. Although their new president lacks basic knowledge about what Bitcoin actually is, still the country has been the biggest cryptocurrency hub in Latin America and generates the highest turnover in all the region.
Under the previous laws, crypto exchanges and other businesses serving as middlemen can provide the data on their clients voluntarily, but after the new legislation was introduced, they can’t refuse or appeal the authorities’ requests to turn over information.