🇧🇷 Brazil Crypto Report #6: 'AgroCoins,' MercadoPago Eyes Crypto, ETH ETF Live on B3, Solana's $20m Fund
Welcome to Brazil Crypto Report for the week of August 2-6, 2021, where we’re synthesizing the key crypto happenings in the southern hemisphere’s largest country.
This week we’re looking into the rise of ‘AgroCoins’ that look to bring new value and efficiencies to Brazil’s massive agriculture sector. Popular fintechs MercadoPago and Meliuz both made some noteworthy crypto noise this week, and we also got some more news on the ETF front - including Latin America’s first ethereum ETF being listed on the B3.
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.
If that’s something you’re interested in, then hit subscribe if you haven’t done so already and read on👇
In Depth: The Rise of Brazil’s AgroCoins
AgroBonus, Coffee Coin and Others Aim to Bring Crypto-Economy to Brazil’s Booming Agriculture Sector
As one of the leading producers of soybeans, sugarcane, coffee, beef and more, Brazil has long been one of the world’s breadbaskets. Agriculture accounts for US$380bn of Brazil’s gross domestic product and nine percent of its total employment, and the sector is estimated to have grown 24% in 2020.
The country’s vast quantity of arable land is rivaled on the global stage only by the likes of United States and Russia, and that supply is growing as local industry refines cultivation techniques in interior states like Mato Grosso that had previously been inhospitable to farming.
Still, the sector is plagued by numerous inefficiencies. These include access to credit and small business loans, bureaucracy and a disparity between the sector’s total output and the real’s devaluation - thereby reducing the purchasing power of rural farmers.
With that context in mind, perhaps it’s not surprising to see the emergence of so-called ‘AgroCoins’ that attempt to create and unlock additional value in the sector.
One such project is AgroVantagens, which was profiled this week in Valor Economico - Brazil’s primary business newspaper. AgroVantagens is a loyalty program that seeks to create a circular economy for producers, wholesalers, retailers and consumers in the agribusiness sector, with its AgroBonus token serving as the native currency of the network.
Users will receive AgroBonus as cashback when transacting with partner entities - for example, when purchasing supplies, seeds and machinery from in-network providers. The token aspirationally would allow all parties to contribute to and benefit from the growth of the agriculture sector.
What’s particularly interesting about AgroBonus is that the value of each token will be tied to the advance of the sector, as measured by a handful of different variables. This means that if implemented properly, the token could serve as an effective hedge against inflationary pressures.
The token is in a testing period until the end of August. It has 35,000 users pre-registered - including rural farmers, businesses and other entities.
These rural producers will be the initial focus of the coin, according to AgroVantagens CEO Jean Carbonera, adding that there are eventual plans to list AgroBonus on an exchange. In five years, he estimates, the network will have 50,000 clients and a US$1bn worth of transactions passing through. An ambitious goal surely, but not inconceivable given the scale of the local industry.
AgroVantagens would also function as a digital bank account that provides certain financial services in both reais and AgroBonus for partner companies and consumers.
The inspiration for the project is Sardex, a regional currency developed by residents of Sardinia that operates exclusively on the Italian island in parallel to the traditional banking system.
Another example of the ‘AgroCoins’ trend is Coffee Coin, which is a stablecoin backed by the price of coffee equities. The coin has appreciated by 35% in its first month of trading on the heels of a rare frost sweeping Brazil.
“Coffee coin combines the best of both worlds: the coffee world - a market that is there and will not end tomorrow, and the crypto world,” said Luis Henrique Albinati, new business director at Minasul - creator of the coin.
We’re bound to see more of these types of projects popping up, particularly if AgroBonus and Coffee Coin see uptake in their respective niches.
In Latin America First, QR Capital Ether ETF Launches on Brazil’s B3 Exchange
QETH11, an exchange traded fund launched by QR Capital that invests solely in ether, went live for trading on Brazil’s B3 stock exchange this week.
According to Exame, the fund will track the Chicago Mercantile Exchange’s Ether Reference Rate.
The fund is open to both retail and accredited Brazilian investors.
In a statement, QR Capital CEO Fernando Carvalho explained:
“With ETFs in the two main digital assets in the market on the B3, the investor gains autonomy to build on his own investment strategy, which is in line with QR Capital’s objective of offering robust options to so that the investor can enter the crypto market in a safe, simple way and with total autonomy to build his own portfolio.”
Another ether ETF will also be hitting the B3 soon. Hashdex’s ETHE11 has been approved by the Comissão de Valores Mobiliários, Brazil’s securities regulator, but has yet to be listed.
Earlier this year, three ether ETFs were approved and began trading on the Toronto Stock Exchange, making Canada the first jurisdiction where these products are available.
Brazil July Bitcoin Trading Volumes Down 19% From June
Bitcoin trading volumes on Brazilian exchanges were down 19% in July from the prior month. Just over 30,000 bitcoins were exchanged during the month, compared to 37,000 in June.
Binance accounted for 39% of that volume, maintaining its dominance in the Brazilian market despite regulatory headwinds.
July 26th was the most popular trading day with 2,400 BTC exchanged. July 11th was the slowest day, registering just 325 BTC in total volume, according to a report from Livecoins.
67,000 ETH was exchange during the month as well, with Mercado Bitcoin serving as the dominant platform for the ETH/BRL trading pair with 32% of total volume.
Solana Foundation and BRZ to Seed Brazil Crypto Projects with US$20m Fund
In what’s being billed as the largest such financing initiative in Brazil, the fund will primarily seek to invest in and accelerate early-stage crypto projects building on the Solana blockchain.
Eligible projects will include those that participated on the Brazilian stage of the Solana hackathon earlier this year, in addition to various other applicants, according to Valor Investe.
Thiago Cesar, CEO of Transfero - creator of the BRZ stablecoin that is pegged to the Brazilian real, explained:
“The fund is aimed at those people that want to undertake, that have a good idea, a good project and need something that is very important for any company or business that is just starting out: investment.”
More than US$2m in investments have already been deployed to projects such as FTT , Serum, and DeFi Land. While these projects are international in nature, the expectation is that the remainder of the funds will go toward Brazilian crypto startups. Cesar explained:
“We know that the venture capital scene, especially in Brazil, is very complicated. We see many investors who only allocate capital to companies that already have some level of traction, and the objective of the fund is to do just the opposite. It is a fund that invests in ideas of people who are building on blockchain, specifically the Solana blockchain.”
This all is part of a broader initiative by the Solana Foundation to directly invest into emerging market crypto ecosystems, with similar efforts being undertaken in Russia, India and Ukraine. Anatoly Yakovenko, president of the Solana Foundation, explained:
“Solana believes that emerging markets have immense potential and is committed to helping develop viable projects and important services in these regions.”
MercadoLivre’s Fintech Arm “Closely Analyzing” Crypto Implementations, ala CashApp, PayPal, Venmo
The president of MercadoPago, the fintech branch of the $78bn online marketplace MercadoLivre (or MercadoLibre in Spanish, as it’s more commonly known), said that the company is “closely analyzing” the potential addition of cryptocurrency custody and payment services to its application.
“We never announce ahead of time which products we will launch, but we see what they are doing, and it’s something we closely analyzing. We can’t say anything more until we make an official announcement,” said Osvaldo Gimenez in response to a question from Bloomberg as to whether MercadoPago is considering cryptocurrency offerings similar to what CashApp and PayPal have launched in the US.
Gimenez continued: “This interest in cryptocurrency shows that we are convinced it holds great potential. We believe that this can be revolutionary for finance, but we’ll see what’s the best format for us to participate.”
While MercadoPago is an Argentine company, Brazil represents more than 50 percent of its transaction volume.
Earlier this year, MercadoLivre announced that it had purchased US$8m of bitcoin to hold in its treasury.
A recent Goldman Sachs report asserts that MercadoPago makes up 60 percent of MercadoLivre’s total valuation.
Hashdex Files for US Crypto ETF in Partnership with Victory Capital
Hashdex, the Brazilian asset manager, submitted a crypto ETF application to the US Securities and Exchange Commission on August 4 in conjunction with US-based Victory Capital.
As reported by Exame, the fund would track the Nasdaq Crypto Index, and was created by the Nasdaq stock exchange in partnership with Hashdex. The proposed fund would include a basket of eight separate crypto assets - bitcoin, ether, litecoin, link, bitcoin cash, uniswap, filecoin and stellar. It’s the first ETF submission to the SEC that proposes to invest in a basket of different crypto assets as opposed to solely bitcoin or ether.
Marcel Sampaio, Hashdex CEO, explained in a statement:
“Victory is a giant in the American market, with more than $150bn under management. We know that the launch of this product is a big step forward for Hashdex, but we have the ideal partner and the knowledge needed to succeed in this challenge. We greatly believe in indexes as a vehicle for investing in crypto assets. We want to offer this efficient methodology to foreign investors.”
Hashdex and Victory join a long list of crypto ETF hopefuls lining up for SEC approval. The SEC has roundly rejected crypto ETF proposals for nearly a decade, citing market manipulation and surveillance concerns.
For those keeping score at home, Brazil now has five crypto ETFs approved for listing, whereas the US still has a big fat zero.
Shopping App Méliuz Acquires Crypto Wallet for US$5m
Méliuz, the popular app that offers discounts, coupons and cashback perks to consumers, has acquired digital wallet Alter Pagamentos for roughly US$5m, marking a bold move to introduce its rapidly expanding 16m+ user base to cryptocurrencies.
Alter processed US$35m worth of bitcoin transactions during the first half of the year, 14x more than the same period in 2020, according to Exame Invest. The crypto wallet integrates with a pre-paid debit card and offers a “cryptoback” service in which consumers earn 0.5-1% in bitcoin on purchases.
In a statement, Méliuz articulated that it sees the deal as an acqui-hire as well as a funnel for new users:
“One of the acquisition’s principal objectives is to bring a talented team of entrepreneurs and developers into Méliuz, along with knowledge of a high-growth line of business that has the ability to be a great engagement tool and attract new users to the company.”