#150: Campos Neto defends Drex at Blockchain Rio
Plus: Charles Hoskinson is skeptical about permissioned CBDCs; Flow Podcast to launch Flow Chain using Tanssi
Olá pessoal!
Greetings from San Francisco and welcome back to 🇧🇷Brazil Crypto Report for the week of July 23-27, 2024.
I hope everyone had a productive experience at Blockchain Rio this week. I wasn’t able to attend sadly, but by all accounts it looks like it was a great experience for everyone involved. Kudos to Francisco and his team for persevering and delivering on that.
🔍What’s in BCR this week?
Roberto Campos Neto defends Drex, tokenized economy at Blockchain Rio
Cardano founder Charles Hoskinson is skeptical about permissioned CBDCs
Flow Podcast to create Flow Chain on Polkadot using Tanssi
Hashdex requests SEC approval for hybrid BTC/ETH ETF in US
Thanks for reading and have a great week!
-AWS
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Campos Neto defends Drex, tokenized economy at Blockchain Rio
Roberto Campos Neto, governor of the Central Bank of Brazil, defended the Drex CBDC/tokenization platform that the bank has been developing during an opening keynote speech at Blockchain Rio while highlighting its place in the bank’s financial innovation agenda:
“Pix, Open Finance and Drex are created within the Central Bank based on the understanding that the financial intermediation of the future is guided by large technological blocks that talk to each other and to cross-border systems…The understanding that the economy is migrating to tokenization has been debated for a long time within the BC.”
Notably, Campos Neto’s speech was his first-ever at an event focused on cryptocurrencies and blockchain.
He argued that Drex will bring many benefits to Brazilian consumers in the same way that Pix has by reducing the cost of banking services and registering contracts.
“Drex is good for frequent payments. It takes what PIX did in instant payments and goes further”
“If I have a programmable platform, I can quickly connect payments around the world, I can have a platform on which people will choose better services in real time, a finance marketplace. Taking this to the next step is getting this all tokenized, which is where Drex comes in.”
Campos Neto explained that the tokenized bank deposit model introduced by Drex will also greatly advance efficiencies in the banking system by forcing banks to know how to deploy blockchain technology effectively.
“Banks that understand tokenization will even better deal with the risks of crypto assets…I believe we are moving towards a tokenized economy.”
The end vision is to create an AI-powered super app in which consumers maintain all their financial accounts, ensuring real-time portability and connectivity.
“It’s thinking about what a finance marketplace would be like. The bank updates rates in real time, has comparability, can choose products and services, can choose to transfer between Drex and currency, consolidated position, payment flow manager, among other features.”
Campos Neto defended Drex’s unique wholesale digital currency model that derives the benefits of digitization and decentralization without disintermediating incumbent banks — a key question that the Drex project set out to solve for early on.
He argued that tokenized bank deposits are a “concrete bridge” to DeFi and a digitized financial system without isolating the balance sheets of banks — a CBDC model that has been proposed by other countries.
“Tokenization of deposits is a more concrete bridge; we don’t want to isolate banks’ balance sheets from digital assets like other countries want…The solution in Brazil was to make tokenized deposits. We understand that this is the ideal format, digital currency is a tokenized deposit, although some people turn up their nose at the name.”
He noted that South Korea is developing a similar tokenized bank deposit system and that there will be potential for connecting these systems via DLT in the future.
Campos Neto also stated that a solution to the well-documented Drex privacy problem is in the works. Recall that the bank has been working feverishly to resolve the so-called “Drex Trilemma” and enable decentralization, programmability and privacy at the same time.
“We are very close to having a solution and I think we will have good news in the coming months.”
You can find Campos Neto’s presentation slides here
Valor Valor Investe BeinCrypto Portal do Bitcoin Exame BlockNews CoinTelegraph Brasil
Cardano founder Hoskinson is skeptical about permissioned CBDCs
The Ethereum co-founder and founder of Cardano was one of the marquee speakers at the event. During his first visit to Rio, he expressed skepticism towards the concept of permissioned CBDCs like Drex and support for CBDCs built in an open way with built-in rights to protect against government overreach.
In an interview with Mariana Maria Silva of Exame, he said:
“Banks are neutral, they are not good or bad. But it depends: do CBDCs have integrity or not? If the intention of CBDC is to make the unbanked bankable and counterbalance the power of banks against retail, and they preserve and protect human rights, it is a good thing. If CBDC is an extension of State power and basically a permanent institutionalization of the power of commercial banks, this is a very bad thing.”
He also argued that CBDCs pose serious dangers to citizens and to the economy, as evidenced by what’s being built in countries like China - a trend that he calls “algorithmic tyranny”:
“When you have a CBDC and you design it the wrong way, if the government doesn't like you, they can just shut off your money. Just like a power company could cut off the power to your house, they could take your money and maybe give it back, maybe not.”
“Why would they do that? If you are a criminal or just expressed opinions against the government and something like that. So it’s not a coincidence that many dictators are quite fond of CBDCs.”
Most importantly, he argued, is that these systems must be meticulously designed and thought through before being deployed, because there will be implications decades later when they are inherited by their successors.
Even if the people currently designing the system currently have good intentions, that may not be the case in 10 or 20 years’ time. There will always be the temptation to violate the Central Bank’s monetary policy and print money, whether it be for political reasons, career reasons or short term gain.
“Even if the rulers are virtuous, honest and good people, the existence of this capacity may worsen over time. We saw this in the United States with the intelligence apparatus that Bush passed after the Patriot Act. He increased the intelligence capabilities in the United States and they said 'we will never use this to hurt people', but the temptation started to appear and everything. Now we realize that this is much bigger than we anticipated.”
More coverage of Hoskinson’s visit to Brazil: Valor BeinCrypto
Flow Podcast to create Flow Chain on Polkadot using Tanssi
With 73 million monthly views, the Brazilian podcast, founded by Igor Coelho — or Igor 3k, is sometimes referred to as Brazil’s version of the Joe Rogan Podcast.
Flow Chain will use Tanssi’s appchains (built on the Polkadot blockchain) to create a network that facilitates more fan participation through ideas like voting and rewards, as well as growing the podcast’s audience. Grupo Flow said in a statement:
“By collaborating with Tanssi, Grupo Flow aims to achieve new goals, strengthen its existing audience and explore a new community of blockchain users, leveraging technology to further enhance its digital media ecosystem.”
The project is expected to launch by the end of this year.
Hashdex requests SEC approval for hybrid BTC/ETH ETF in US
The Rio de Janeiro-based crypto asset manager filed a form S-1 with the US Securities and Exchange Commission requesting approval of its Hashdex Nasdaq Crypto Index US ETF.
The S-1 filing is the final stage of paperwork at the SEC before the product goes live and begins trading. If approved, it would be the first crypto index ETF trading in the US.
The ETF is a hybrid product that would hold roughly 70% spot bitcoin and and 30% spot ether, though it would potentially include other assets should the SEC deem them to be eligible:
“If any cryptoasset other than Bitcoin and Ether becomes eligible for inclusion in the Index, Sponsor will transition to a sample replication strategy, with only bitcoin and ether in the same proportions determined by the Index.”
Coinbase Custody and BitGo would custody the fund’s assets if it launches.
The Block Portal do Bitcoin CriptoFacil BeinCrypto BlockNews CoinTelegraph Brasil
Agrotoken expands beyond commodities with Justoken
Agrotoken, the commodity tokenization firm, is expanding to other verticals such as land, livestock, energy and sustainability in response to inbound demand. CEO Eduardo Novillo Astrada explained:
“We were approached by major players to tokenize livestock assets, we formed an energy partnership with Raízen, among other examples…Nowadays, our flagships are soybean and corn tokenization, but we are opening up to everything. We have already tokenized receivables with a Brazilian bank.”
🗞Brazil Crypto News Rundown
📈 Markets
Nubank said that it saw a 1,500% increase in cryptocurrency transaction volume between March 2023 and March 2024, with a 56% increase in the number of customers who used the product at least once. The Nubank Cripto product now has 4.2 million users. The digital bank also announced an expansion of its cryptocurrency price alert service. (CoinTelegraph Brasil) (CriptoFacil) (Livecoins)
Bitcoin hit a new all-time high against the Brazilian Real, checking in above R$381,000. (Portal do Bitcoin)
Itaú tokenized a R$40 million (US$8 million) commercial note from an electricity company and listed it for public offering. In this arrangement, Itaú BBA originated and structured the credit, Laqus acted as the central depository, Itaú was the investor, Liqi registered the asset on blockchain, Oliveira Trust served as fiduciary agent, bookkeeper and settlement bank, VSBO executed the legal structuring. (Valor) (CoinTelegraph Brasil)
Crypto assets recorded a deficit of US$8.6 billion (R$48.5 billion) in the first six months of 2024, according to Central Bank statistics. The figure is 77% larger than the same period last year.
Economists estimate that the total for 2024 could top US$20 billion, compared to US$11.7 billion
Cryptocurrency imports reached US$9.4 billion while exports were just US$737 million. Economists that the total for 2024 could top US$20 billion
The BC implemented a methodological reclassification of cryptocurrency accounting on its balance of payments. Cryptos without an issuer, like bitcoin, were previously included in the trade balance but are now included in the capital account.
The bank’s current source of information on crypto-asset transactions are ex change contracts, which don’t distinguish between crypto assets with issuers and those without issuers, though this will change as more information becomes available. (Valor)
See this Valor explainer for more information on how the bank handles crypto in its trade balance and current account statistics
Mercado Bitcoin launched a R$10 million (US$2 million) corporate credit token for Rappi Brasil. The Rappi Digital Fixed Income token is offered at an initial value of R$100 and matures in January 2025 with an expected return of 15% annually. Diego Gomes, co-founder of RappiBank in Brazil, said:
“With the funds raised, Rappi will boost operational efficiency, scalability and the adoption of innovative technologies, such as asset tokenization.” (Portal do Bitcoin) (BeinCrypto) (CoinTelegraph Brasil)
Mercado Bitcoin also held its first on-chain sale of digital fixed income tokens to an international platform, called TradeFinex. (Portal do Bitcoin)
Hashdex’s HASH11, ETHE11 and BITH11 were the most traded crypto ETFs on Brazil’s B3 stock exchange so far in 2024. (B3)
50% of cryptocurrency investors in Latin America are seeking long-term gains and savings, found a new survey by Binance. (CoinTelegraph Brasil)
Roxom, a stock exchange that pays dividends and issue debt in bitcoin, launched its operations in Brazil. (CoinTelegraph Brasil)
📲 Adoption
Recife-based Zro Bank received its authorization from the Central Bank of Brazil to become a payments institution as an electronic currency issuer. (Valor)
Several bitcoin miners are leaving Paraguay and moving to Brazil, citing difficult conditions. Penguin Group signed a contract to secure 400MW of energy in Brazil after encountering “excessive greed” working with ANDE — Paraguay’s electric utility. Bruno Vaccotti, head of public affairs, told CriptoFacil:
“Today, Paraguay is making every effort to expel an industry, without technical foundations, with an ill-conceived short-term vision and without measuring the impact that greed and arrogance have as a result.”
Moonbeam is trying to build its presence in Brazil further through new partnerships in the country, Moonbeam Foundation COO Aaron Evans told CoinTelegraph Brasil:
"We are very excited to work in the Latin American market. We believe there are many sectors with untapped opportunities – from RWA to DeFi. It's been a year since we started working in Brazil and we couldn't be more pleased with our results: dozens of new applications, thousands of new users and millions of transactions, bringing a lot of activity and awareness about Web3 to the Brazilian community.”
TecBan launched a new tokenization infrastructure platform called Nexchain, which will help financial institutions register assets on blockchain. The tool will be tested during the second phase of the Drex pilot. Tiago Aguiar, executive superintendent of products at TecBan, told Valor:
“It is available to create, download and upload nodes on the blockchain. The second step will be the custody of assets and keys and the third will be to facilitate the tokenization of assets, both regulated and non-regulated.” (CriptoFacil) (CoinTelegraph Brasil)
Diego Lugano, a former São Paulo Futebol Clube and Uruguay national team football player, signed on as an ambassador for the Olecoin game on the Chiliz blockchain. Olecoin is a “tap to earn” game similar to Notcoin or Hamster Kombat in Telegram. (Valor)
DUX announced the launch of its Decentral platform which aims to create a financial ecosystem for influencers and content creators, including the possibility to do a type of “IPO” through tokenization. The platform uses AI to forecast growth and revenue, and offers credit at lower rates than those offered by traditional institutions. Luiz Octavio Goncalves Neto, CEO of DUX, explained:
“It looks at the finances of content creators, offering more opportunities such as new forms of monetization, interaction and engagement with the fan base.” (BlockTrends)
MoonPay launched a new Pix-integrated app called Moonshot intended to help users trade memecoins. (CoinTelegraph Brasil) (BeinCrypto)
BNDES, Brazil’s national development bank, is searching for candidates cryptocurrency knowledge as part of its latest hiring round. (Livecoins)
Brazilian startup Notus Labs launched its Chainless app, a mobile account abstracted app that enables easy on-chain operations, at Blockchain Rio. The project has won zkSync and Avalanche hackathons since launching. (CoinTelegraph Brasil)
Ether Private Bank, the first Web3-native bank in Brazil, is using Hathor for technology infrastructure. Glaydson Rodrigues, CEO of the bank, said:
"We are excited to partner with Hathor Network, a leader in blockchain technology and aligned with our mission to bring the best of Web3 innovations to the betting industry.” (CoinTelegraph Brasil)
🏛 Policy, Regulation and Enforcement
Federal Deputy Aureo Ribeiro said at Blockchain Rio that he’s focused on approving legislation that would mandate asset segregation (requiring brokerages to separate customer vs. company assets) this year. He also argued that Brazil needs legislation to incentivize cryptocurrency mining.
“Our focus for the year 2024 is to approve segregation. The topic is already debated, mature, presented and public in our report. We have already started to create a consensus with all party leaders in Congress.” (Valor) (CoinTelegraph Brasil)
Binance’s new VP of Latam Guilherme Nazar met virtually with officials from the Central Bank on Thursday, July 18.
The meeting was with Dario Durigan, executive secretary of the Ministry of Finance, and his special advisor Fabio Henrique Bittes Terra. Pinheiro Neto Advogados partner Fernando Gomes attended the meeting with Nazar.
It was not revealed what topics were discussed in the meeting. (Valor) (Portal do Bitcoin) ( CriptoFacil)
Brazil’s Central Bank should finalize crypto asset regulation in early 2025, bank official Nagel Paulino said at Blockchain Rio. Paulino is head of the bank’s regulation department and is responsible for regulating VASPs.
“This semester we will hold a second public consultation with the normative texts on Vasps and finalize the drafts. The regulatory strategy is expected to be ready to begin implementation at the beginning of next year.”
The Public Ministry of the State of Rio de Janeiro denounced four people involved in the “Prince of Bitcoin” pyramid, which was operated by A.C. Consultoria e Gestão Eireli and caused losses of R$234,000 to investors. (Portal do Bitcoin)
Two accomplices of Francisco Valdevino da Silva, known as the “Bitcoin Sheik”, plead guilty to charges of conspiring to commit electronic fraud in the US. Nestor Nunez and Ramon Perez worked for Forcount, which was described by authorities as a criminal operation led by Brazilians to defraud Spanish speakers around the world. (Portal do Bitcoin) (Livecoins)
One of the criminal cases against Glaidson Acacio dos Santos, aka “Pharaoh of Bitcoins”, had its first hearing in Rio de Janeiro and heard from seven witnesses. (Portal do Bitcoin)
Jonas Spritzer Amar Jaimovick, owner of an alleged cryptocurrency pyramid called JJInvest, has made several appeals to followers on social media to raise R$10,000 to help him pay legal costs. (Portal do Bitcoin)