🇧🇷 Brazil Crypto Report #14: Fake News Alert: No, Brazil is Not Making Bitcoin Legal Tender
Welcome to 🇧🇷 Brazil Crypto Report #14 for the week of Sept 27 - Oct 1, 2021.
First things first: there’s a lot of fake news floating around right now regarding a piece of proposed legislation in the Brazilian Congress that would regulate bitcoin and cryptocurrencies. We’re going to spend some time trying to clarify what’s going on.
The confusion appears to have arisen from Bitcoin Twitter misinterpreting remarks made last week by Federal Deputy Aureo Ribeiro, the lead sponsor of proposed legislation to regulate cryptocurrency businesses in Brazil.
On Monday morning, a video of Ribeiro discussing his proposal in the Chamber of Deputies emerged on Twitter.
Bitcoin Twitter jumped on all of this to proclaim that Brazil was next in line to make bitcoin legal tender after El Salvador did so in September. Even bitcoin super-influencer Anthony “Pomp” Pompliano ran an entire segment on this on his “Best Business Show” on Monday morning.
It’s important to clearly state that the proposed legislation would not make bitcoin legal tender, as Portal do Bitcoin journalist Saori Honorato explained in a Twitter thread👇
In fairness, this all was a bit confusing because Ribeiro’s comments, which originally appeared in Livecoins - a Portuguese language crypto news site, appear to have been lost in translation. Honorato notes in his above Twitter thread that Ribeiro was only expressing his opinion when he said that Brazilians could soon be using bitcoin to buy houses and to pay at McDonald’s, and that a legal tender provision is NOT included in the proposed legislation (nor has it ever been even considered).
Furthermore, Brazilian Central Bank President Roberto Campos Neto took the exact opposite position last week, stating that the Banco Central will first regulate cryptocurrencies as an investment and THEN as a medium of payments due to overwhelming consumer demand for the investment use case.
So what does Ribeiro’s proposed legislation actually propose? It would regulate cryptocurrency exchanges and businesses by requiring them to register with a to-be-determined federal authority. This would address a sensitive spot in the Brazilian crypto market, which is the schism between exchanges that are registered with domestic financial and tax authorities, and those that are not. This proposed law would require all such businesses to register before commencing operations in the country, and then abide by a common regulatory framework thereafter. The end goal here is to implement a system to better monitor, for tax collection purposes, Brazilian citizens who are buying and selling cryptocurrencies.
Next up for the is a floor vote in the full Chamber after passing at the committee level last week. This vote has not yet been scheduled and will come at the prerogative of Arthur Lira, the Chamber’s president, though sources inside the Chamber tell me that this not high up on his list of priorities.
The proposed law also looks to impose harsher penalties on money launderers and operators of cryptocurrency scams and pyramid schemes. Bitcoin pyramid schemes have become so common in the country that one Brazilian city, Cabo Frio, has earned the nickname “Little Egypt” due to the prevalence of these scams there. The bill also removes a ridiculous provision that would include airline mile programs in the same regulatory framework as cryptocurrencies, and it modifies the definition of virtual assets (away from the European Parliament version and to the Financial Action Task Force version).
So all things considered, the bill is actually bullish for bitcoin and cryptocurrency adoption in Brazil, just not for the reasons bitcoiners on Twitter got excited about.
Now, we all know that folks in this space can get a bit carried away with developments like this that seem to confirm or advance narratives to which they already subscribe (confirmation bias, anyone?). And I don’t mean any disrespect to anyone who inadvertently shared fake news given the nuances and translation issues at play here (FTR I’ve got mad respect for Pomp as he’s probably done more than anyone on the planet to educate the masses about bitcoin).
Stepping back and taking a look at the big picture, the momentum in Brazil for digital payments is coming from Pix, the instant payment system rolled out last November by the Banco Central, and the eventual Digital Real - which is expected to go into testing next year with a full rollout expected in 2024. The Banco Central has been admirably forward-thinking in its Digital Real design process as it looks to make the CBDC interoperable with other smart contract platforms - which would potentially allow it to be used in decentralized finance applications (more on this in the news recap below). The point is obvious here that the Brazilian government’s preferred digital currency payments system is Pix and the future Digital Real, not Bitcoin.
Please continue reading to catch the rest of the Brazil crypto news from last week (there was a lot of it!) and the latest Brazil crypto job postings.
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Brazil Crypto Hiring Spotlight
Ripple is looking for a technical services engineer for its Sao Paulo office.
Binance is still seeking a new country director for its Brazil operation.
Novadax is looking for a customer experience analyst.
For Portuguese readers, CoinTelegraph Brasil has a handy run-down of different Brazil crypto related jobs here.
Brazil Crypto News Rundown
Exchanges and Funds
Binance will give away 3,000 BUSD and exclusive NFTs in a new promotion aimed specifically at the Brazilian market. (CoinTelegraph Brasil)
Binary options broker Quotex is accused of freezing accounts of its best-performing users, blocking withdrawals and disappearing with users’ deposits. 120 consumer complaints were logged against the platform in August and 410 in September, according to the consumer defense website Reclame Aqui. (Portal do Bitcoin)
Brazil’s B3 Exchange, the primary stock exchange in the country, could act as an oracle for smart contracts within the Digital Real ecosystem, translating real-world data into the digital realm. The subject arose during a Banco Central webinar entitled “Smart Contracts, IoT and Programmable Money,” in which options for integrating the Digital Real and other CBDCs into the world of smart contracts and decentralized finance were discussed. In this ‘Defi 2.0’ world, CBDC tokens could be used as collateral and play a fundamental interoperability role across various chains. The Banco Central’s function would be to serve as a bridge between the public and private sectors that promotes innovation, regulation and public safety, allowing CBDCs, stablecoins and cryptocurrencies to safely coexist.
One of the big problems to be solved in this scenario is that of who serves as the oracle in the system. Luís Kondic, director of product listings at B3, explained that while the opportunity is intriguing, it’s still a bit early:
“We are evaluating the positions in this new structure that is being developed. We are looking and evaluating the best forms of interaction and participation in this ecosystem. However, I believe this is something for us to evolve and move forward in order to meet the needs futures of this programmable cash payments system.” (Exame)
Binance confirms that Brazilian customers using the Pix instant payment system are experiencing withdrawal problems. The world’s largest cryptocurrency exchange is suggesting that customers use bank account information instead of Pix until the problem is resolved. The exchange sought to reassure customers that any unsuccessful withdrawals would be credited back to the user’s account. (Livecoins)
Investment broker Vitreo has launched a partnership with Empiricus that offers users bitcoin cashback rewards in a new promotion. (CoinTelegraph Brasil)
The B3 Exchange’s first cryptocurrency investment course saw 15,000 registrants. The online course, which was held on September 27 in partnership with QR Capital, sought to educate users on security, custody, avoiding scams and finding accurate information. (CoinTimes)
NovaDax is listing five new coins in October, bringing its total offering to more than 65. New token listings on Brazil’s second largest crypto exchange by volume (according to crypto data site CoinGecko) include Bancor (BNT), Quant (QNT), Crypto.com Coin (CRO), Fantom (FTM) and Holo (HOT). (CoinTelegraph Brasil)
Socios CEO Alexandre Dreyfus, who has inked ‘fan token’ partnerships with Flamengo, Corinthians and Atletico Minero, says Brazilian consumers are “disposed toward adopting new technologies at a much higher level in comparison to other markets.”
He explained that while Brazilian football clubs may not necessarily have the same global name recognition as European powerhouses like Paris Saint-Germain, Arsenal or Manchester City (clubs that have also entered into partnerships with Socios), their level of overall fan engagement is similar.
Dreyfus explained in an interview with MktEsportivo:
“If you look at the numbers on social networks, Flamengo and Corinthians aren’t that far behind the main European clubs in terms of followers. The main difference is probably that the majority of these fans are in Brazil and not spread out globally. But Brazil is an enormous country and many of these fans live far from the city and don’t have the opportunity to go to the stadium and interact with the team regularly. Because of this, fan tokens and Socios.com can be a useful and valuable tool for these clubs, as well as their fans.”
The city of São Thomé das Letras is looking to become a hub for Dash, with more than 20 local businesses now accepting the cryptocurrency as payment. Proponents of the plan hope to turn the Minas Gerais city into a tourist destination for cryptocurrency enthusiasts, creating a “Crypto Valley” of sorts. (CoinTelegraph Brasil)
Raiar Orgânicos raised US$250k to finance small farmers using CPR tokens via the Liqi tokenization platform. (CoinTelegraph Brasil)
Bitcoin accounts for 77% of cryptocurrency payments in Brazil, according to a new study by CoinPayments. Ether, Polkadot and Binance Coin also earned significant share of the US$40m worth of crypto payments that were made in the country during the first half of 2021, a 400% increase in volume from the prior year. (Exame) (CoinTelegraph Brasil)
The Brazilian Securities and Exchange Commission (CVM) has authorized the first issuance of regulated tokens as part of its regulatory sandbox. Vórtx, Flow BTC and QR will be able to issue tokens representing securities within a CVM-monitored environment. 33 projects had applied to the sandbox, with three being selected - two of which employ blockchain technology.
The CVM said in a statement:
"The approved projects involve the issuance, public distribution and trading, in an organized over-the-counter market, of securities issued or represented in the form of tokens in blockchain networks.” (CoinTelegraph Brasil) (Exame)
In one of the CVM’s approved projects, QR Capital and Vórtx are teaming up to launch a security token exchange, commencing in February 2022. The joint venture will soon select 12 projects to launch tokens on the exchange. It will provide the issuance certificates, banknotes and required compliance information for each of the projects. Juliano Cornacchia, CEO and co-founder of Vórtx, said that “the tokenization process is here to stay and will change the way people make investments.” (Portal do Bitcoin)
Crypto asset manager Hashdex is now sponsoring the 17 year-old Brazilian kitesurfing phenomenon Gabriel Benetton. (CoinTelegraph Brasil)
Brazilian personal finance educator and best-selling author Gustavo Cerbasi is discouraging his followers from investing in cryptocurrencies, saying that prices are too volatile and that the assets “lack fundamentals”. Cerbasi is one of the country’s leading influencers in the realm of personal finance, boasting 911,000 YouTube subscribers. (CoinTimes)
Policy, Regulation and Law Enforcement
Cryptocurrencies will be regulated first as an investment and secondly as a payment method, Banco Central President Robert Campos Neto stated this week during a presentation on inflation. He explained that the Banco Central is designing a series of regulatory initiatives to account for the explosive growth of cryptocurrencies in the Brazilian market over the last year.
The decision to focus on the investment use case was made because it’s experienced more demand than the payments use case. Campos Neto explained:
“Keeping in mind that money has a function as a a means of exchange, but when we look at cryptocurrencies as a means of exchange, there’s been little growth.” (Folha de S. Paulo)
Cryptocurrency trading in Brazil is now impacting the country’s 2021 balance of payments by US$4bn through August , according to a new Banco Central report. The country has been including cryptocurrency flows in its balance of payments statistics since 2019, pursuant to guidance from the International Monetary Fund. (Folha de S. Paulo)
Deputy Alexandre Frota called for the elimination of Pix, the Banco Central’s new instant payment service, saying that “people are being assaulted and killed because of this application” in a Twitter post. (CoinTelegraph Brasil)
The Banco Central confirmed a data leak of nearly 400,000 Pix users’ personal keys after hackers successfully compromised one of the participating banks. Additionally, users’ CPF numbers (similar to a social security number in the US), Pix registration date and personal banking information were also leaked. The Banco Central said in a statement that impacted users would be notified individually and that sensitive personal data were not affected. The event marks the first known incident in which Pix user data has been compromised since its launch in November 2020. (CoinTelegraph Brasil)
Police in the state of Bahia seized 522 bitcoins from an organized crime group accused of corruption and obstruction of justice. (Portal do Bitcoin)
Disgruntled Cabo Frio investors set fire to a restaurant owned by Jonas Gomes da Silva, known as the “Bitcoin Pastor,” after his company Eagle Eyes allegedly ceased activities and disappeared with investor funds. According to local media, the company informed its investors in September that it would be ending operations due to “everything that has happened in Cabo Frio,” a city that has earned the nickname “New Egypt” due to a prevalence of pyramid schemes. (Portal do Bitcoin)
‘Faraó dos Bitcoins’ Glaidson Acácio dos Santos was transferred to a maximum security facility after guards discovered that he had been receiving picanha, sausage and cellphones from the outside in his cell in a Rio de Janeiro jail. (Globo)
Photo credit: Globo
Eliane Medeiros de Lima, owner of the crypto exchange CointradeCX, was one of the 21 individuals indicted in connection with ‘Operation Kryptos' - which is being brought against the alleged GAS Consultoria bitcoin pyramid scheme. Investigations by Federal Police allege that she was one of the principals involved in sending abroad funds illegally obtained by GAS. (CoinTelegraph Brasil)
If you’re new here, the meta-thesis for this publication is that Brazil - with a population of 214 million and a US$1.8tn economy - is the most overlooked crypto market in the world. The objective is to highlight the important news and provide useful context for the estrangeiro (foreigner) English-speaking audience.
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