🇧🇷 Brazil Crypto Report #8: Brian Brooks and Jeremy Allaire Meet with Central Bank President, Crypto ATMs Come to Brazilian Shopping Malls, Institutions Pile into Crypto ETFs

Aug 22, 2021

Welcome to 🇧🇷 Brazil Crypto Report for the week of August 16-20, 2021, where we synthesize the key crypto happenings in the southern hemisphere’s largest country.

Here’s a sneak peak of what we’re looking at this week:

1️⃣. A group of crypto industry leaders met with Banco Central do Brasil president Roberto Campos Neto on August 16, including Circle CEO Jeremy Allaire and former Binance.US CEO Brian Brooks

2️⃣. Binance pulls the plug on futures contracts for Brazilian customers

3️⃣. Brazil’s largest shopping mall chain is installing crypto ATMs

4️⃣. Brazilian clothing retailer Renner is hit by a ransomware attack

5️⃣. Banco Central official warns that cryptocurrencies are the “achilles heel” of anti-money laundering efforts

We also touch on some news out of Mercado Bitcoin and the 2TM Group, and look at how Brazil’s new crypto ETFs are faring.

Obrigado!

Aaron

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.

If that’s something you’re interested in, then hit subscribe if you haven’t done so already and read on👇

News Recap

Brian Brooks, Jeremy Allaire Meet with Brazil Central Bank President Roberto Campos Neto

A group of crypto industry representatives met with Brazil Central Bank president Robert Campos Neto on August 16 to discuss “institutional subjects.” Among those in the meeting included Circle CEO Jeremy Allaire and former Binance.US CEO Brian Brooks, according to the bank’s official meeting log.

While the log lists Brooks as representing of Binance.US in the meeting with Campos Neto, he confirmed in an email that he attended in an independent capacity and that neither Binance nor Binance.US were represented in the meeting. Brooks resigned as CEO of Binance.US on August 6 after taking the job in early May.

Brooks declined to disclose details of what was discussed in the meeting, though given Allaire’s presence and Circle’s current ambition to become a fully regulated bank in the United States, it seems likely that stablecoins and the central bank’s Digital Real plans were among the subjects brought up.

Other attendees included Scott Sobel and Michael Nicklas of Valor Capital Group, a venture capital and private equity firm focusing on the Brazilian market. Notably, one of its co-founders and managing partners is Clifford Sobel, who served as United States Ambassador to Brazil from 2006 to 2009.

The entity was the lead investor in Brazilian crypto asset manager Hashdex’s $26m raise in May 2021, and is an investor in BlockFi, Bitso, Dapper Labs, Celo, Coinbase, Circle and more.

Marcos Viriato, CEO of Sao Paulo-based Parfin, was also in attendance. Parfin is a Valor Capital Group portfolio company that offers crypto investment services to institutions. It raised a US$1.3m round in March of this year.

This isn’t the first time that Campos Neto has fielded meetings with crypto industry representatives in his tenure as central bank president. In May 2020, he fielded a video conference meeting with executives from Ripple, most notably CEO Brad Garlinghouse and board member Ben Lawsky, the infamous architect of New York’s BitLicense.

According to CoinTelegraph Brasil, Campos Neto has also taken meetings with representatives from Mercado Bitcoin, as well as ABCripto and ABCB - a pair of local industry non-profits.

Binance Ceases to Offer Futures Contracts to Brazilian Traders

The move comes after a July 2020 order from the Brazilian securities regulator that the exchange cease offering the product to Brazilian customers.

“Out of respect for the Brazilian order, Binance has implemented restrictions on our site that block the commercialization of derivative products,” a Binance spokesperson told CoinTelegraph Brasil.

Last July, the Comissão de Valores Mobiliários ordered that the exchange cease to offer crypto derivative products or face a fine of US$185k per day. It determined that Binance did not have authorization to offer such products, whether they based on cryptocurrencies or otherwise.

Last month, Binance Brasil’s country manager Ricardo da Ros resigned after six months on the job, citing a “misalignment of expectations” about the role.

Hashdex Ether ETF Sees US$22m in Opening Day Trading

The fund, which trades under the ticker ETHE11 and offers 100% exposure to the world’s second largest cryptocurrency by market cap, launched on Wednesday August 18 on Brazil’s B3 stock exchange - generating R$121m (or US$22m) in trading volume before close.

Hashdex’s head of growth Roberta Antunes stressed the importance of bringing this investment opportunity to the masses, noting that the price of ETH has risen more than 600% in the last year. She told CoinTelegraph Brasil:

As the drive to adoption continues, this technology could be the largest investment opportunity of our generation. So we are very proud to bring the ETHE11 to the market with the objective of offering the Brazilian investor simple, secure and regulated access to this asset with enormous potential, with all of the security mechanisms that capital markets offer.

The ETHE11 is the second ether-specific ETF to launch in Brazil this year, and the fifth crypto-native ETF.

Regulatory Update: Senate to Hold Digital Real Hearing, Crypto Bills Advance, Campos Neto Speaks to Crypto Regulation

The Senate’s Commission on Science and Technology will host a public hearing to discuss the potential implementation of the digital real, which has been actively researched and developed by the Banco Central since August 2020.

The hearing was called by Sen. Rodrigo Cunha, who heads the commission, according to Portal do Bitcoin. He said:

“We need to know where this is and what benefit it will bring to the Brazilian people. The subject is important and different.”

Additionally, two early stage bills proposing to regulate cryptocurrencies in Brazil advanced to the Senate Committee on Economic Affairs for consideration.

As reported by Portal do Bitcoin, the first bill proposes that the Banco Central and the Comissão de Valores Mobiliários serves as the primary regulators of the cryptocurrency market. The second would require Brazilian authorities to inspect legal entities that work with cryptocurrencies domestically.

Banco Central president Roberto Campos Neto addressed the crypto regulation question in an interview with the Council of the Americas (video in English).

In response to a question from a JPMorgan analyst, Campos Neto stressed the importance of creating an evolving regulatory structure that focuses on data more than individual transactions:

For us, it’s more than just regulating crypto and regulating stablecoins - it’s what is the regulation of the future. The financial markets are changing so much and so fast; it’s all becoming data. I get projects in our innovation lab and I see that 60-70% of the projects are not even within my regulated environment. I started to see that we need to actually think about how we’re going to reshape the world of regulation and how we’re going to regulate data. Finance is going to be about data. It’s going to be impossible to regulate financial transactions without understanding regulation of data

Brazil’s Largest Shopping Mall Chain to Install Crypto ATMs

brMalls is installing 15 crypto ATMs in its properties across eight cities in Brazil via a new partnership with Coin Cloud.

The machines will be housed in malls, or “shoppings” in Portuguese, in São Paulo, Rio de Janeiro, Piracicaba, Barueri, Niterói, Goiânia and Vila Velha.

Customers will be able to purchase bitcoin and more than 30 other cryptocurrencies at the ATMs, including ether, litecoin, USDT and USDC.

Over the past year, Coin Cloud has installed machines elsewhere in Campinas, Belo Horizonte, Recife, Curitiba and Campo Grande.

According to CoinTelegraph Brasil, the country will have a total of 50 such ATMs in use by the end of the year.

2TM Partners with Concash in Security Token Play

2TM, the holding company that owns Mercado Bitcoin among others, is allocating US$7.5m to ConCash, a company that operates in the secondary consortium market by buying active, inactive and canceled shares.

The partnership will allow 2TM to accelerate the issuance of security tokens through its MB Digital Assets arm, which specializes in tokenizing real assets and registering them on a blockchain.

MBDA director Ronaldo Faria explained in a statement (per CoinTelegraph Brasil):

This is a product with high potential for profitability and one that we really want to offer our customers. But it takes an experienced partner that can offer the best options. Concash solves this issue by acting as a share originator for the MBDA tokenizer.

These assets will be brought to market via the Mercado Bitcoin platform.

Credit Suisse, BTG Pactual Among Largest Holders of Hashdex Crypto ETF

The two banks hold a combined R$30m (US$5.5m) of HASH11, Hashdex’s ETF that tracks a basket of cryptocurrencies, with Credit Suisse holding 471,500 shares and BTG Pactual with a position of 211,500 shares.

Other institutional investors in the ETF include Pollux Capital, which holds 547,000 shares, worth US$4.5m, making it the largest single investor. Other asset managers that hold at least 100,000 shares include G5 Administradora de Recursos, Verde Asset Management and Vitreo.

In total, institutional investors make of 25% of total investors in the fund, according to data from Bloomberg and reported by CoinTelegraph Brasil.

HASH11 tracks the Nasdaq Crypto Index, which is comprised of Bitcoin, Ether, Litecoin, Chainlink, Bitcoin Cash, Uniswap, Filecoin and Stellar Lumens.

Banco Central Official Says Cryptocurrencies are “Achilles Heel” in Fight Against Money Laundering

The remarks were made by Antonio Juan Ferreiro Cunha, head of the Department of Conduct Supervision at the Banco Central, at an anti-money laundering event hosted by a trade association of Brazilian banks.

He stated, according to Valor Investe:

“Virtual assets are considered (as part of Brazil’s national risk assessment). It is one of the areas that require action in the next phase. There exist various legal projects in Congress to regulate these activities. When we have a regulatory body responsible for norms and supervision, we will be able to work in a more consistent and strong fashion. As of now we don’t have this, and it’s a problem that we have, it’s our Achilles heel.”

The remarks come as Brazil is due for an assessment in 2022 by the Financial Action Task Force, the international entity that coordinates anti-money laundering and terrorism financing standards globally and has recently been weighing in heavily on cryptocurrency the last two years.

To prepare, a government and industry task force has been convened to create a national national risk assessment.

Brazilian Clothing Store Renner Hit With Reported US$185m Ransomware Attack

Renner, the popular Brazilian clothing retailer, was hit with a ransomware attack on Thursday, August 19, that left its systems partially disabled.

While Renner did not disclose the amount demanded by the hackers, Portal do Bitcoin reports the figure to be R$1bn, or roughly US$185m, to be paid in cryptocurrency. 1300 of the company’s servers were compromised, according to the report.

Mercado Bitcoin to List 7 New Crypto Assets Including WBTC, MATIC and SUSHI

Brazil’s largest cryptocurrency exchange will the new assets in response to demand from customers, bring its grand total to 36 cryptocurrencies and 17 “fan tokens”. The news was reported by Valor Investe.

The most prominent listing is Wrapped Bitcoin, which is basically a synthetic ERC-20 version of bitcoin that lives on the ethereum blockchain and can be used in decentralized finance applications.

Other tokens set to be listed include Matic, which is the native token of the Ethereum Layer 2 solution Polygon. Matic has a current market cap of US10bn. OMG, SUSHI, BAND, ANKR and BNT round out the list of new tokens.

Did I miss anything? Have ideas for new content, topics or formats? Leave a note in the comments or find on Linkedin, Twitter or Telegram at @AaronStanley. Thanks for reading!

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