Brazil’s securities regulator is advocating mandatory tokenization as part of a broader effort to modernize how funds are tracked and supervised. Otto Lobo, president of the Comissão de Valores Mobiliários (CVM), Brazil’s equivalent of the U.S. Securities and Exchange Commission, argued that traditional surveillance systems are increasingly strained by the scale and complexity of modern investment funds.
The issue has become more urgent as assets held in regulated funds reach a reported net worth of $2.32 trillion. Conventional administrative systems often depend on spreadsheets, manual reporting, and separate records held by intermediaries. Tokenization could replace some of these fragmented processes with shared digital records that regulators, fund managers, custodians, and investors can verify more efficiently.
What Mandatory Tokenization Means
Tokenization is the process of representing an asset or ownership interest as a digital token recorded on a blockchain or distributed ledger. If a fund tokenizes its shares or assets, each unit can carry a traceable record of ownership, transactions, and regulatory status.
Think of a traditional fund like a handwritten ledger passed between offices. Every participant must keep its own copy, and discrepancies are possible. A tokenized fund works more like a synchronized digital register. Changes are recorded consistently and may be visible to authorized participants in near real time.
Mandatory tokenization would mean regulated market participants are required to use this infrastructure rather than merely being permitted to experiment with it. Proponents say this could give the CVM better visibility into how funds operate and reduce compliance costs by replacing repetitive manual checks.
Why Brazil Is Seeking a New Surveillance Model
According to Lobo, existing methods of oversight have become obsolete because of the funds’ enormous size and the wider range of products now available. Tokenized securities can move through more digital channels, making it harder for authorities to rely on periodic filings alone.
Brazil already has an important legal foundation for digital assets. The country’s securities regulator established a regulatory framework for virtual assets, and legislation introduced in 2025 sought to clarify how tokens linked to investment funds should be classified. The proposed tokenization push could build on that foundation by connecting rules for issuing digital securities with stronger reporting standards.
The Role of AI Supervision
The CVM is not proposing technology in isolation. Its vision combines tokenization with artificial intelligence supervision, with the goal of detecting suspicious activity more quickly. AI systems can analyze large volumes of transactions and flag unusual patterns that humans might miss, such as rapid transfers, repeated counterparties, or activity that conflicts with a fund’s stated strategy.
However, AI-assisted monitoring also creates new questions. Regulators may need clear standards for data quality, explainability, privacy, and human review. Automated surveillance should support accountable decision-making rather than become a black box.
Potential Benefits for Investors and Markets
A coordinated tokenization framework could offer several advantages. First, investors may receive clearer information about where their assets are recorded and whether the underlying holdings match the fund’s disclosures. Second, regulators may spot compliance issues sooner instead of waiting for quarterly or annual reports.
Tokenization may also lower administrative costs. Issuers, brokers, custodians, and transfer agents spend significant resources reconciling records. Shared digital infrastructure can reduce duplication, although the transition will require new standards and investment from market participants.
For crypto investors, direct exposure to tokenized funds may eventually make traditional fund portfolios easier to manage in digital wallets and on regulated platforms. Before buying or holding such assets, investors should confirm that the offering is authorized, understand the rights represented by the token, and verify whether the provider offers withdrawal access to a self-custodied wallet. A hardware wallet such as Ledger can be useful for securing private keys, but it does not protect against a poorly designed token or an unlicensed platform.
Risks and Implementation Challenges
Mandatory tokenization is not a complete solution. A token only improves transparency if the data entered into the system is accurate. Blockchain records cannot automatically prove that a fund’s assets exist, that valuations are correct, or that every transaction complies with local rules.
Other concerns include cybersecurity, concentration among technology providers, interoperability between blockchains, and the need to protect personal information. Regulators must also decide whether public blockchains, permissioned networks, or hybrid systems are appropriate for different products.
Additionally, tokenization could make regulated assets more accessible through established crypto exchanges. Platforms such as Kraken and Bitvavo may list eligible digital assets, but availability does not guarantee regulatory approval in Brazil. Investors should check local rules and the legal status of each token before depositing funds.
What to Watch Next
The key question is whether Brazil will move from broad policy support to a concrete implementation timeline. Market participants will want to know which funds must be tokenized, which technologies qualify, how reporting will work, and whether foreign issuers can participate.
Brazil’s approach could become a model for other large markets seeking to combine blockchain infrastructure with modern financial supervision. If the CVM pairs clear standards with responsible AI oversight, mandatory tokenization may help the regulator manage a fast-changing market while giving investors stronger records and more reliable disclosures.
