The Brazilian Securities and Exchange Commission issued a note clarifying that some initial coin offerings may fall under existing Brazilian Securities laws, and listing the following potential risks to investors:
- fraud and Ponzi schemes;
- lack of suitability rules;
- money laundering and tax evasion;
- service providers noncompliant with regulation;
- promotional advertising material that does not comply with CVM rules and regulations;
- operational risks in trading environments not monitored by the CVM;
- cybernetic risks (including attacks to infrastructure, systems and access credentials impairing access to assets, as well as partial or total loss of assets) associated with management and custody of virtual assets;
- operational risk associated with virtual assets and their respective systems;
- volatility associated with virtual assets;
- liquidity (i.e. risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss at a quoted price); and
- legal and operational challenges in cases of litigation with issuers, considering the virtual and cross-border nature of the operations with virtual assets.