Over the last few years, technology has been increasingly applied to agribusiness and now it has arrived to revolutionize the financial viability of the activity. The so-called Agtechs are growing rapidly. Their main role is to create innovative solutions for rural producers.
In 2019, the Agtech Brazil Radar indicated the presence of 24 startups in the agribusiness financial services category in the country. Last year, that number reached 85. It’s understandable, since the demand for credit in the sector in Brazil exceeds R$1 trillion per year, according to market estimates. But there is a lack of more agile, secure, efficient and intelligent mechanisms to finance farmers and ranchers.
One of the most disruptive and interesting solutions proposed by some of the Agtechs is the “tokenization of agribusiness”, made possible by the use of blockchain technology, which has expanded the possibilities of raising lines of credit for various sectors. This technology makes it possible for new investors to enter the activity, democratizes access to credit and creates new opportunities for everyone, with better efficiency and the promotion of greater security and transparency in agribusiness transactions.
The agricultural enterprise can, for example, choose to “tokenize” the soybean harvest. The total volume produced is metaphorically divided into small portions that make up a blockchain and placed on the market in the form of digital tokens, which represent ownership of a portion of the production and can be bought by investors. The producer raises financial resources and the investor recovers his investment after the sale of the crop, with appropriate returns.
It is also possible to “tokenize” future crop contracts. In this scenario, the tokens represent the right to buy or sell soybeans on a future date at a predetermined price.
There is also the possibility of raising funds for other purposes. Producers can “tokenize”, for example, a solar energy production project on a farm. The tokens represent ownership of part of the project, and investors receive dividends according to the energy generated.
This approach promotes greater liquidity in the market, facilitates and speeds up transactions for producers. It also helps mitigate market risk by allowing producers to protect themselves against price fluctuations. Transparency is another strong point of this modality, since all transactions are recorded on the blockchain, which guarantees security and reliability for investors.
It is therefore clear that the “tokenization of agriculture” presents a wide range of opportunities and is driving a significant transformation in various aspects of the sector.
With the rise of these new digital economy models – and tokenization is just one of them – the potential to facilitate access to rural credit is also growing, through the union of financial technology and solutions aimed at the agricultural field.
However, there is still a lack of definitive regulation on the subject. In December 2022, Law 14.478 came into force to establish rules relating to digital assets. Basically, it appoints the Central Bank as the competent entity to regulate, authorize and supervise virtual asset service providers.
The rules that will regulate these services are currently being studied and are expected to be published in the coming months. BACEN is also counting on the support of the Securities and Exchange Commission (CVM) to deal with aspects relating to specific virtual assets, which can be considered a security.
It is clear that this new reality brought about by the “tokenization of agriculture” requires an innovative legal structure, which is not limited to the traditional forms of business companies or common loan agreements.
There is a new universe, with still sparse legal regulation, which makes it more challenging for agri-producers to access the resources available to them. Legal professionals need to understand both agribusiness and electronic regulation in order to make the most of this new frontier in agricultural financing.
