The Brazilian financial markets regulator, or CVM, is set to roll out a new “decree” that will allow government-appointed bodies to better police the crypto sector.

The CVM president, João Pedro Nascimento, announced that the forthcoming regulation will enable cryptoeconomics to work alongside traditional finance, granting the CVM the power to determine which tokens are securities.

The CVM is expected to regulate all crypto assets that fit the definition of security, while the Central Bank will act as the regulatory body for tokens that are not classified as securities.

Nascimento added that the CVM is also focusing on a decentralized finance (DeFi) project called Open Capital Market, which aims to bring DeFi to the capital market, starting with the transfer of custody of funds. The project is expected to roll out sometime this year, with the CVM working on it in conjunction with the Central Bank.

While the Central Bank is also looking to tighten crypto regulations, it has stated that its central bank digital currency (CBDC) project, the digital real, will help foster domestic businesses.

The bank is designing the digital real with a view to helping small businesses grow at a faster rate, in contrast to other nations focusing on retail-focused CBDC models.

Nascimento emphasized that crypto regulation had been “very well received” by the sector and that the CVM’s objective is to help the development of the crypto space without creating rules that could “strangle” the sector.

The forthcoming regulation will likely improve the regulatory environment for the Brazilian crypto sector, ensuring it continues to thrive while also protecting investors.