🇧🇷 Brazil Crypto Report #9: Mercado Bitcoin to Launch Custodian; Pyramid Schemes; Felipe Neto Pumps $ADA; Corinthians Fan Token
Welcome to 🇧🇷 Brazil Crypto Report for the week of August 23-27, 2021, where we look at the key crypto happenings in Latin America’s largest economy.
Lots of action as we wrap up the summer. Most notably in my favorite story of the week, police in Brazil have repurposed and completely decked out a lambo confiscated in the “Bitcoin King” bust earlier this summer. Read on to see the pictures!
In this issue we also look at:
1️⃣ Brazilian police seize US$29m in crypto assets in a pyramid scheme crackdown Operation Kryptos
2️⃣ Mercado Bitcoin will launch a custodial service in September that aims to attract institutional clients ala Gemini and Coinbase
3️⃣ Binance will introduce withdrawal fees for Brazilian customers starting Sept 1
4️⃣ Brazilian social media influencer Felipe Neto pumps ADA and says anyone not invested in crypto today will regret it “monstrously”. Neto boasts 42m subscribers on YouTube and 13m followers on Twitter
5️⃣ Brazilians purchased nearly US$4bn worth of cryptocurrency in the first half of 2021, according to the Banco Central
6️⃣ Corinthians, the popular São Paulo football club, will launch its $SCCP ‘fan token’ in Sept
7️⃣ Huobi is launching a comeback in Brazil after a failed entrance in 2018-19
8️⃣ Tensions between the crypto and banking industries grow as Itau Unibanco, Brazil’s largest bank, says it will not bank crypto exchanges
9️⃣ Asset manager Hashdex partners with blockchain analytics firm Coinfirm on defi risk management tools
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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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Brazilian Police Seize US$29m of Crypto Assets in “Operation Kryptos”
Federal Police confiscated the sum and arrested five in a crackdown of an alleged pyramid scheme, according to CNN Brazil, which said the operation was the “largest apprehension of cryptocurrencies in history.”
One of those arrested included Glaidson Acácio dos Santos, owner of the consultancy GAS Consultoria Bitcoin, based in Rio de Janeiro. He was arrested in a mansion in the Barra da Tijuca neighborhood.
Santos is alleged to have funneled billions of reals through a pyramid scheme that promised a return of 10% per month to clients who invested cryptocurrency. Despite the lofty promises, the company had no website, no social media channels and its phone number on file with the Receita Federal (Brazil’s tax authority) did not function.
His attorneys explained in a statement:
“Glaidson Acácio’s defense is aware of the arrest and so far without access to the contents of the investigations. Only after proper analysis of all documentation will we be able to express ourselves in a concrete manner.”
Other arrests in the operation occurred in Cabo Frio and Guarulhos Airport in São Paulo. In addition to crypto assets, police also seized US$3.6m in cash, 21 luxury vehicles, high-end watches and jewelry.
Federal Police in Paraná Repurpose Bitcoin Lambo Seized in “Rei do Bitcoin” Bust
The Gallardo LP 560-4 Lamborghini was seized from “Rei do Bitcoin” (Bitcoin King in English) Cláudio José de Oliveira earlier this summer. Oliveira is accused of scamming seven thousand clients out of US$288m through his business Grupo Bitcoin Banco.
Now, federal police in the state of Paraná will be using the US$150,000 luxury vehicle for their own enjoyment.
The law enforcement agency explained in a statement:
“Equipped with a 10 cylinder engine and 560 horsepower, the vehicle goes from zero to 100 km/h in 3.7 seconds, reaching a maximum speed of 325 km/h.”
The lambo will be used for special events will not for daily policing activities, according to Portal do Bitcoin. Eventually the vehicle will be auctioned off, with proceeds going toward victims of the Rei do Bitcoin scheme.
(photos courtesy of Policia Federal)
Mercado Bitcoin to Launch Custodial Arm in September
2TM, the holding company that owns Mercado Bitcoin, is launching a crypto custodian with an eye on institutional investors like corporate treasurers and family offices.
Mercado Bitcoin, Brazil’s largest crypto exchange, will be Bitrust’s first client with hopes that other institutional clients will follow suit.
The service will be setup and operate similar to those of Coinbase or Gemini, two US exchanges that offer integrated exchanges and custodial services. Bitrust CEO Ronald Faria told Valor Investe:
“Bitrust was born out of market demand…with the arrival of Bitrust, family offices our treasurers, for example, will not need to leave the platform.”
Faria stressed that Bitrust will operate at the same standards as other international players, noting that it invested US$2m into the storage infrastructure complete with a primary and backup data center. The operation will be audited by one of the Big Four global auditing firms.
Binance to Introduce Withdrawal Fees for Brazilian Customers
The world’s largest crypto exchange and largest exchange servicing the Brazilian market will end its zero withdrawal fee promotion for Brazilian customers starting September 1.
In a statement, the exchange said it will charge a flat rate of R$2.90 (US$0.50) on all withdrawals rather than a percentage of the withdrawal.
CoinTelegraph Brasil notes that Binance has successfully offered zero withdrawal fees as a means of attracting customers since it began operating in Brazil in late 2019.
The R$2.90 rate is still quite competitive in the market, however. Mercado Bitcoin, for example, charges R$2.90 plus 1.99% for fiat withdrawals, according to Cointrader Monitor.
Brazilian YouTube Phenom Felipe Neto: Anyone Not Invested in Crypto Today Will “Regret it Monstrously” in Near Future
The Brazilian YouTube influencer took to social media to encourage followers to invest in cryptocurrencies. He stated:
“My personal opinion is that anyone who is not investing in crypto today will regret it monstrously in the very near future. Just as many people regret not having started investing in 2017-18.”
With 42.8 million subscribers, Neto ranks among the world’s leading YouTube influencers. For context, he has slightly more subscribers than Katy Perry and slightly fewer than Taylor Swift. He also has 13.7 million Twitter followers.
Last weekend, Neto put out a tweet to commemorate ADA, the native token of the Cardano blockchain, hitting an all-time high.
Banco Central: Brazilians Have Purchased US$3.8bn in Cryptocurrencies in First Half of 2021
Roberto Campos Neto, Banco Central president, said that he is seeing is a “large increase in demand for cryptocurrencies.” The remarks came at a forum hosted by the Getulio Vargas Foundation on Tuesday, May 24, according to Valor Investe.
He estimated that Brazilians currently hold US$7.8bn worth of cryptocurrency.
Banco Central data also shows that May was the busiest month during the first half of the year, with Brazilians purchasing US$750m worth of crypto, including US$159m worth of bitcoin in a single day. Total purchases in June fell to US$692m and declined again in July to US$576m.
Portal do Bitcoin reports that beginning in August, the Banco Central will begin tracking cryptocurrency transfers between residents and non-residents in its balance of payments - effectively treating them in the same manner as other types of international capital flows.
Corinithians ‘Fan Token’ to List on Mercado Bitcoin on September 2
The $SCCP token launch will coincide with festivities commemorating the 111th anniversary of the popular Sao Paulo football club.
The token will give fans around the world the ability to interact with the team and its players in a novel way, including loyalty rewards and special access to events.
The club expects to raise US$1.7m via the initial offering of 850,000 units using the Socios platform at a price of roughly $2 per token. José Colagrossi, head of marketing and communications at Corinthians, explained:
“The issuance is the only time that the price is fixed. From there on out, the market will determine the price.”
$SCCP will initially list on Mercado Bitcoin, with the intention of making it available in the future on other platforms.
Socios president Alexandre Dreyfus told Valor Investe:
“The issue of money is fundamental for the clubs. There is a ceiling for generating revenue by ticket sales because the stadium is limited and prices can’t be raised much for social responsibility reasons. Revenues from selling jerseys, public spaces and naming rights are also limited. Tokens are a great alternative.”
Huobi Launches Comeback in the Brazilian Market; Offers BTC, ETH, LTC and EOS for Purchase
The world’s second-largest exchange by trading volume announced a new partnership with Latamex that serves as a fiat-to-crypto gateway in Brazil and other Latin American countries.
The service went live on August 20, according to Portal do Bitcoin. For the first month, the exchange will charge no fees to users making purchases with BRL provided that they set up and use their Latamex account.
Huobi Global’s director of strategy Jeff Mei explained:
“Amplifying our presence in this region is a natural progression as we expand our services to meet the needs of people around the world.”
Portal do Bitcoin notes that this isn’t Huobi’s first venture in the Brazilian market. In 2018 it opened a branch in São Paulo, but within six months most of the local hires had been laid off. Huobi Brasil CEO Frank Tao left the company in June 2019.
There’s no indication that Huobi has reconstructed a local team; rather it appears to be relying on its partnership with Latamex, which is the Latin America focused arm of the payments processor Settle Network.
Tensions Grow as Itaú Unibanco Denies Banking Services to Crypto Exchanges
Brazil’s largest bank has re-affirmed its position of not providing banking services to local cryptocurrency businesses, despite offering cryptocurrency investment product as a way to attract new clients.
ABCB, a nonprofit advocating on behalf of the local crypto industry, filed a complaint with the Adminstrative Council for Economic Defense - the nation’s competition and antitrust regulator - arguing that it is contradictory for Itaú to promote cryptocurrency products to customers while simultaneously refusing to provide banking services to crypto exchanges.
Itaú emphasized that it is unable fulfill its AML/CFT obligations because exchanges do not have sufficient information about and control over their users, and reiterated that it will not bank such clients until these concerns have been assuaged.
Portal do Bitcoin reports that Itaú has in recent years closed the bank accounts of several domestic exchanges including Mercado Bitcoin, Foxbit and Braziliex.
Hashdex Partners with Blockchain Analytics Firm Coinfirm for DeFi Risk Monitoring
The Brazilian asset manager will use Coinfirm’s analytics tools for “instititutional grade risk management in defi.” This includes anti-money laundering and counter-terrorism financing screening across liquidity pools, with the end goal of mitigating rug pulls and flash loan attacks.
In a statement, Samir Kerbage, Chief Product & Technology Officer at Hashdex explained:
“Hashdex aims in providing access to the best crypto investment thesis through simple, secure and regulated financial products. As DeFi becomes an important sector of the crypto economy, we’ve developed a risk-based approach to interact with those peer-to-peer markets called “Know-Your-Pool”. This allows us to conduct proper due diligence and to understand the source of the assets that are participating and financing the DeFi Pools. Coinfirm’s Pool Risk Assessment Report plays an essential role in this process.”
Hashdex currently offers a set of exchange traded funds and other products intended to bring crypto to a broader base of investors.
That’s all for this week! As always, thanks for reading!