The new Brazilian regulation blocks closed pension funds’ access to the digital asset market.
On March 31, the Brazilian National Monetary Council (CMN) officially shut the door on cryptocurrency markets for the country’s closed pension funds. With the issuance of Resolution 5.202, the regulatory body explicitly prohibited Entidades Fechadas de Previdência Complementar (EFPC) – Brazil’s closed pension entities – from investing in Bitcoin and other digital assets, citing excessive volatility and associated risks. The new rule affects tens of thousands of unionized workers and employees whose retirement savings are managed by EFPCs.
As reported in a note from the Ministry of Finance circulated among local media:
“The resolution also prohibits investments in virtual assets, considering their specific investment characteristics and the risks involved”.
Bitcoin seen as a risk
The CMN justified its decision with the intent to protect Brazilian citizens’ retirement savings from the high volatility of the cryptocurrency market. By preventing closed pension funds from investing savings in Bitcoin and digital assets, the authority aims to safeguard the long-term financial stability of pensions.
It’s important to note that the ban does not seem to apply to open pension funds or individual retirement products sold by banks and insurers. These are regulated separately and may still allow indirect investments in cryptocurrencies through exchange-traded funds (ETFs) or other platforms.
In Brazil, the main difference between closed and open pension funds concerns membership and management. Closed pension funds, also called “negotiated funds,” are established through agreements between employers and trade unions or professional associations. They are reserved for specific categories of workers, such as public employees, private sector employees, or freelancers, and membership is collective. Open pension funds, on the other hand, are accessible to anyone, regardless of employment status. They can be individually subscribed by anyone, including students, unemployed individuals, or self-employed workers, and are managed by banks, insurance companies, or financial firms.
Global contrast
Last year, in the UK, pension specialist Cartwright led the first British pension fund to invest in Bitcoin, allocating 3% of its assets. In the United States, several states have begun experimenting with Bitcoin allocations for their pension systems. One example is Wisconsin, where the state investment committee revealed it had invested $340 million in Bitcoin through BlackRock’s spot ETF (IBIT).
