#164: Brazil's Central Bank weighs IOF tax on cryptos
Plus: OKX rolls out Ayrton Senna activation in Sao Paulo; Brazil and Hong Kong to test CBDC payments
Olá pessoal!
Welcome back to 🇧🇷Brazil Crypto Report for the week of October 28-November 1, 2024!
Apologies for putting out this edition a bit late — I was in Buenos Aires for LaBitConf over the weekend so still catching up on tasks!
I enjoyed running into many of you in person in Argentina. The country has an incredible bitcoiner energy to it that I’m excited to experience more in the future.
My event highlight was meeting Peter Todd — aka Satoshi Nakamoto himself (if you believe the HBO documentary 😂)
✋ Before you read on, make sure you register for ABCripto’s Criptorama 2024 event on Nov 19-20 in Sao Paulo before tickets run out!
🔎 What’s in this week’s BCR?
Central Bank explores IOF tax and exchange license for crypto companies
OKX rolls out Ayrton Senna activation in Sao Paulo
Central banks of Brazil and Hong Kong to test CBDC payments
Crypto imports into Brazil up 61% in 2024
Thanks for reading and have a great week!
-AWS
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Today is election day in teh United States, so for this week’s podcast interview I spoke with Samir Kerbage who is Chief Investment Officer at Hashdex.
Hashdex is a global asset manager that offers cryptocurrency exchange traded products in the US, Europe and Brazil. Samir outlines the various scenarios that could occur this week in the US and the impacts those will likely have on cryptocurrency markets in the coming months.
🔥 Samir has some great insights into how this event will impact your portfolio so definitely be sure to tune in for this one.
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Crypto imports into Brazil up 61% in 2024
"Imports” of cryptocurrency into Brazil during the first nine months of 2024 were up 60.7% over the prior year period, according to new data unveiled by the Central Bank of Brazil.
The country has seen US$12.9 billion worth of inflows through September, which is up from the US$11.7 billion recorded for the entire year of 2023.
The main driver of this growth has been stablecoins, which account for 70% of all crypto transactions for the year.
Net imports for the month of September, however, were down slightly from August. Fernando Rocha, head of the bank’s statistics department, said:
“This does not necessarily indicate that they have reached a ceiling, but it helps to look at the dynamics of crypto assets.”
Reuters Valor Exame CriptoFacil CoinTelegraph Brasil
Central Bank explores IOF tax and exchange license for crypto companies
Brazil’s Central Bank is said to be exploring a rule that would require certain crypto companies to apply for an exchange license. This would be differentiated from the standard VASP license framework that the bank is expected to release next year, and it has some in the market concerned.
The objective for such a license would be to target stablecoin transactions that are used for remittances and payments abroad. The difference in licenses would stem from the fact that some crypto companies only operate in the realm of asset tokenization and not necessarily international transfers.
Concern appears to be growing among authorities that stablecoins are being used for regulatory and tax arbitrage. In particular, they are currently treated as financial assets and not currencies for tax purposes — meaning that the 1.1% IOF tax is not being charged on these transactions.
The bank has also been closely monitoring the impact of crypto outflows on the country’s capital account. Crypto and fintech attorney Nicole Dyskant told Valor:
“The main agenda is not to lose visibility of the control of the currency that leaves Brazil and goes abroad. This is essential for the Central Bank, in addition to related controls such as preventing money laundering and currency evasion.”
Valor reports that representatives from exchanges are expressing concern over potential IOF requirements. They argue that it is essentially impossible for smaller entities to monitor how its customers use the stablecoins that they’ve purchased, because customers can easily withdraw from the exchange to a self-custody wallet and then send the funds out of the country outside the exchange’s purview. An unidentified industry source said:
“Instead of paying IOF or any other fee, you can transfer to the ‘cold wallet’ and then to a brokerage outside the country. The market will find alternatives. They will not want to pay a spread imposed by the Central Bank.”
Marcel Mascarenhas, a former Central Bank regulator and now a partner at Warde Advogados, argued that the bank is well within it’s purview to create a tiered licensce structure — even if the industry objects”
“It is up to the Central Bank to regulate the requirements for the institution to operate. The Central Bank already separates those who have a commercial or multiple bank license from those who have an exchange license. It can make this distinction through layers of licenses with specific requirements.”
Nathaly Diniz, head of tokens and institutional sales at Lumx, said that the regulator has the authority to determine the cases in which IOF would apply to stablecoin transactions. However, this would be difficult to implement because it would require understanding the customer’s intention for making the transaction:
"If I am buying stablecoin to make a remittance, then the exchange regulations apply, but if I am paying a developer's salary, it is treated differently."
OKX rolls out Ayrton Senna activation in Sao Paulo
OKX completed 12 months of operation in the Brazil market this week, and reported that it has processed R$2 billion (US345 million) worth of crypto trades during that time.
The exchange commemorated by unveiling the OKX Race Club in Sao Paulo. The Formula One initiative is a part of its sponsorship of McLaren Racing and pays homage to legendary Brazilian racer Ayrton Senna.
Guilherme Sacamone, general manager for OKX in Brazil, told Valor that the exchange will continue to expand aggressively and that it aims to be one of the top three exchanges in the country:
“Brazil has responded well to our infrastructure, so we can expect greater communication effects. They won’t be disappointed with the support we have. We can expand the funnel.”
OKX CEO Hong Fang also paid her first visit to Brazil, emphasizing that the country:
"is a very important hub for Latin America. When we look at our global strategy and where we should have our local resources, we really look at the regions where we see good potential for crypto adoption or already existing adoption.”
Exame BlockNews CoinTelegraph Brasil
Central banks of Brazil and Hong Kong to test CBDC payments
The two central banks are entering a partnership to test out international payments using digital currencies involved in their respective CBDC projects, meaning that Drex will be tested out in international operations.
The goal of the collaboration is to “conduct cross-border tokenization experiments" involving Brazil’s Drex and Hong Kong’s Project Ensemble.
Bank president Roberto Campos Neto said that the agreement
"is an important step in this new phase of the construction of Drex. Participation in cross-border experiences and debates is essential to help create an even more integrated global financial market. Thus, we consider the connection of two jurisdictions on opposite sides of the globe to be symbolic".
Exame BlockNews CriptoFacil CoinTelegraph Brasil
🗞Brazil Crypto News Rundown
📈 Markets
Bitcoin reached a new all-time high in Brazilian reals, reaching R$418,000. The number is up from R$209,000 last year. (Portal do Bitcoin)
Central Bank president Roberto Campos Neto pushed back on the idea of a BRICS digital currency. Speaking at the UK Brazil Conference in London, he said:
"When we see this talk about the BRICS currency or the common currency of Latin America, we realize that we don't need any of that. If we imagine that all countries will have an instant payment system for customers, and if we can connect the payment system instantly, this debate about currency blocks is no longer relevant." (CoinTelegraph Brasil)
Binance rolled out its Binance Wealth product in Brazil. The platform is meant to appeal to institutional investors like asset managers, family offices hedge funds, pension funds and endowments looking to diversify. The initial focus of the product is in Latin America and Asia — areas where Binance’s high net worth individual customer base is growing most rapidly. (Valor) (BlockNews) (CoinTelegraph Brasil)
Bitget has hired former Binance executive Min Lin as its chief business officer. He had previously overseen Binance’s Latin America operations. (Valor) (Portal do Bitcoin)
Crypto.com has appointed Thales Freitas as its general manager for Brazil. He was previously the CEO of Bitso Brasil. (Portal do Bitcoin) (BlockNews)
Liqi and Peak, a financial institution, tokenized a basket of payroll loans from public employees into a credit rights investment token (TIDC is the acronym in Portuguese). The size of the operation is R$10 million. (Valor)
Ripio CEO Sebastian Serrano says he believes the price of bitcoin will hit US$1 million per coin by the end of the decade. (Valor)
Parfin has hired former AWS executive Jiten Varu to lead its international expansion into Europe, Middle East and Asia. (Valor)
BTG Pactual’s Mynt crypto platform has added several new currencies including JITO, SEI and EIGEN. (Exame)
The Santos FC Fan Token surged 120% after being listed on Binance. (Portal do Bitcoin) (CoinTelegraph Brasil)
Sports betting activity could reduce Brazil’s GDP by 0.3% — a R$36 billion (US$6.3 billion) loss, according to a report by Banco Santander. (CoinTelegraph Brasil)
SMU and Estar.Finance launched Brazil’s first RWA receivables certificate token to be traded on a regulated secondary market. (CoinTelegraph Brasil)
📲 Adoption
Ledger CTO Charles Guillemet paid a visit to Brazil to preach the virtues of crypto self custody. He argued that without self-custody, “cryptocurrencies are not very interesting”. (Exame) (Portal do Bitcoin)
What will it look like to “pay with Drex”? Rogerio Melfi of ABFintechs explains in an op-ed for BlockNews
The Brazilian federal government wants to have 150 million citizens using its new blockchain-based identity card by 2026. (CoinTelegraph Brasil)
Dux CMO Joao Pedro Novochadlo won two awards at the BRICS Business Forum in Moscow last month. He received the BRICS Solution Award and the BRICS Future Makers award, which recognize entpreneurs from the bloc putting forth innovative ideas. (CoinTelegraph Brasil)
SP Negocios, the economic development arm for the city of Sao Paulo, is partnering with Polkadot to provide blockchain programming training through Codigo Brazuca. (CoinTelegraph Brasil)
Satsconf, Brazil’s largest bitcoin focused conference, revealed its agenda which includes speakers like Alex Gladstein of Human Rights Foundation and podcaster Preston Pysh. The event takes place November 8-9. (Livecoins)
Drex will be integrated with Open Finance — another cornerstone project of the Central Bank’s financial innovation agenda. Bank director Otavio Damaso said during a live broadcast:
"we have a vision for the future that these three major initiatives of the Central Bank, Pix, Open Finance and Drex, will interact. These are things that will be working together, one complementing the other and often one having a piece of the other". (Exame)
The Solana Superteam Brasil hosted the finals for its Copa America hackathon
🏛 Policy, Regulation and Enforcement
Federal Police targeted a criminal group that moved R$1.6 billion (US276 million) using unauthorized sports betting platforms over three years. (Valor) (Portal do Bitcoin) (CriptoFacil)
Federal Deputy Julia Zanatta spoke out against the Drex project during an interview with a crypto influencer. She previously introduced a bill to prevent the extinction of paper money. She said:
“The more I read about DREX, the less I want it to be implemented.”
One year after recommendations from special CPI congressional committee on crypto pyramids were published, none of the three pieces of legislation proposed by the committee have advanced in Congress. (Portal do Bitcoin)
Portal do Bitcoin examined the 10 largest crypto pyramid schemes in Brazil’s history.
Brazil’s Ministry of Finance signed a technical cooperation agreement with four monitoring and integrity groups to track manipulation of results in sports betting and other problems related to online gambling in the country. (CoinTelegraph Brasil)
The Ministry of Finance also ordered the blocking of 1443 betting sites that did not file a request to operate by the September 17 deadline. A grand total of 2,500 sites have been ordered to be blocked. (CoinTelegraph Brasil)
Gislene Cabral de Sousa, head of compliance and risk at NovaDAX, provides an update on crypto asset seizure rules in an Exame op-ed
Brazilian footballer Vini Jr. and 20 other players will face legal action for promoting Omegapro, a global crypto pyramid scheme that moved 3 billion euros. (Portal do Bitcoin)
Beefund, a crypto platform that promised 12% daily profits but has since blocked withdrawals, has been allegedly stealing the likenesses of high profile international investors in an attempt to appease customers. (Portal do Bitcoin)
Federal Deputy Aureo Ribeiro says he intends to introduce legislation that would regulate stablecoins later this year. (Portal do Bitcoin)
Federal Police indicted Eduardo Requiao, brother of a former Parana governor, for receiving R$3 million in bribes that ended up in the “King of Bitcoin” pyramid scheme. (Portal do Bitcoin)
Minister of Justice and Public Security Ricardo Lewandowski said that Brazil’s money laundering laws need to be revised to include illegal crypto mining and transaction activity. (Portal do Bitcoin) (CoinTelegraph Brasil)