#165: Consultation Season and All-Time Highs
Plus: Bolsonaro not a fan of Drex; BeeFund crypto pyramid looking ugly
Olá pessoal!
Welcome back to 🇧🇷Brazil Crypto Report for the week of November 4-8, 2024. And what a week it has been with markets ripping (bitcoin up to $86,000 as I’m writing this) in light of the Trump victory in the US. 2025 is going to be a wild year so get ready! 📈
🎉We also saw the long-awaited second public consultation on crypto regulations from the Central Bank come through. You can read up on it below; I will also publish a podcast episode later this week where I break it all down.
No Devcon for me this year sadly — I’ve just returned from from Michigan where I was helping out with the largest collegiate blockchain conference in the United States. Lots of talent in the pipeline across the ~40 university groups that attended. Super bullish!
Below you can find me paying homage to Michigan’s 2023 college football championship team👇
✋ 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! The team has just released the full program and features a great lineup of speakers and sponsors discussing crypto adoption and policy issues in Brazil
🔎 What’s in this week’s BCR?
Central Bank issues two long-awaited consultations on crypto regulations
Receita Federal issues a public consultation on reforming Normative Instruction 1.888 — Brazil’s foundational crypto tax reporting regulation
CVM will release a public consultation of its own on asset and fixed income tokens
BeeFund crypto pyramid is looking ugly as customers unable to withdraw funds
Thanks for reading and have a great week!
-AWS
🙌 🇧🇷Brazil Crypto Report is a free publication; if you wish to support my work you can do so by hitting the button below👇
Brazil Crypto Report is presented by
LIT Collective is the ultimate creative and design studio for Web3 companies.
Based in Brazil and serving the globe, they’ve helped more than 100 brands with user-centric branding, UX/UI design, motion, Webflow development and other creative needs.
Their experienced team will walk you through the complexities and nuances of Web3-native design and branding — helping you to grow faster, gain credibility and build brand awareness.
Check out their website, follow them on X/Twitter and Instagram, and book a free consultation to learn about how LIT Collective can help you with your creative needs.
🎙New podcast!
No new podcast this week, but please check out this episode I recorded last with Hashdex CIO Samir Kerbage about the impacts of the US election on crypto markets!
🎧 You can find Brazil Crypto Report content wherever you listen to podcasts: Spotify | Apple Podcasts | Amazon | Anchor | YouTube
Central Bank issues two new consultations for crypto regulations
Brazil’s Central Bank released two new public consultations regarding its intention to regulate the crypto asset market focusing on consumer protection, financial stability and operating requirements. The public will have until February 7 to submit feedback to these documents via the Participa Mais portal.
These come nearly a full year after the bank issued its first consultation on the subject, which sought responses to more than 30 questions from market participants.
The first consultation deals with the creation of companies providing crypto asset services. The framework calls for three distinct types of licenses — intermediaries, brokers and custodians — each with minimum capital requirements to balance operational risk. Intermediaries will require minimum capital of R$1 million, custodians R$2 million, and R$3 million for brokers.
Rodrigo Borges, an attorney at CBA Advogados, told Valor:
“The minimum capital is to ensure that the players are able to provide the services for which they will be authorized…In fact, it creates an opportunity for financial institutions to enter this market, because they already meet stricter regulatory requirements.”
The second consultation regulates the processes for companies that provide virtual asset services. Regulation of these companies would be consolidated with regulation of companies operating in foreign exchange or securities due to the similar nature.
The specific documentation required and deadlines will be disclosed at a future date, the Central Bank said. It also committed to releasing a specific regulatory proposal by the end of the year defining how crypto asset companies can operate in Brazil.
The TLDR from all of this is that the focus on capital requirements, governance rules and consumer protection seems quite positive for large banks, brokerages and investment platforms.
Smaller crypto-native startups and institutions would have a harder time meeting the requirements because they would need to obtain virtual asset service provider (VASP) licenses. Existing regulated financial institutions would have an easier path to entry.
Speaking to Valor, Fabio Rodarte of Levy & Salomão argued that this structure will likely restrict market participation due to heightened costs and suggested that the bank could instead create other means of authorization that are proportional to the individual risks presented.
🙌 Our friends at Machado Meyer Advogados have kindly provided an English language translation of the consultation documents if you want to have a look for yourself.
Here you can find the notice and proposed regulation for the first consultation regarding the creation and licensing of crypto servicer providers
Here you find the notice and proposed regulation for the second consultation for virtual asset service providers
Valor Portal do Bitcoin Valor Investe Livecoins Exame CoinTelegraph Brasil
Receita Federal issues consultation on crypto tax rules
Brazil’s tax authority unveiled a public consultation of its own seeking opinions from the market on how it should update Normative Instruction 1.888 — the 2019 rule that stipulates how exchanges and individuals must declare crypto asset transactions.
1.888 would be replaced by a new rule that is being called DeCripto that would be broader in scope so as to cover new types of crypto assets that have been created since 2019. It would also introduce new rules developed by the OECD.
The draft rule states:
“DeCripto includes the concepts and rules of the [Crypto Asset Reporting Framework] model, such as cryptoassets, cryptoasset service providers, rules for assessing operations with cryptoassets and due diligence procedures.”
The new rule would also collect more info on crypto asset transfers flowing in and out of the country, as well as token rewards earned from airdrops, staking and mining.
Thiago Barbosa Wanderley, an attorney at Salles Nogueira Advogados, told Valor:
“The IRS is increasingly tightening its grip and requiring people to declare things that were previously off the radar, which are transactions with foreign exchanges.”
The consultation is open until December 6.
Valor Portal do Bitcoin CriptoFacil InfoMoney BeinCrypto Livecoins CoinTelegraph Brasil
CVM to release consultation on asset tokens
Not to be outdone, the CVM — Brazil’s securities regulator — will also release a public consultation on reforming Resolution 88. The rule regulates offers in the crowdfunding system and now covers tokenized debt issuances.
The announcement was made by chief of staff Pedro Castelar during an event in Sao Paulo last week. The agency is receiving comments and suggestions from the industry about how to reform or improve the regulation. Castelar said:
“Resolution 88, when it was conceived, was to accommodate share sale transactions. It was not expected that it would have the volume that we currently see in debt transactions.”
Bernardo Srur, president of ABCripto, said that token offerings have surpassed R$1.3 billion in offerings since last year, but the activity has started to hit a regulatory ceiling. He told Valor:
“It is entirely possible that tokenization will help the capital market, but reforms are needed for this ceiling to be raised.”
CriptoFacil BlockNews CoinTelegraph Brasil
BeeFund crypto pyramid freezes customer payouts
Crypto investment platform BeeFund is accused of blocking customer withdrawals and recently took its website offline. The company had promised investors 12.75% daily returns 😱 and used TikTok to heavily promote the scheme to young people.
It announced recently that it would transform all customer balances into a new crypto called BEEB 2.0. To access their balance, users must first deposit 10% of their balance onto the platform via stablecoins 😱😱
After publishing a report about BeeFund’s difficulties, Portal do Bitcoin claims that it received numerous complaints from clients unable to withdraw their funds. Reclame Aqui has also been littered with similar stories. Several users have said that even after they deposited the 10% they are still unable to access their funds. 😱😱😱
Portal do Bitcoin BlockTrends Livecoins Livecoins
🗞Brazil Crypto News Rundown
📈 Markets
Brazilians traded a record R$10 billion (US$1.7 billion) in bitcoin futures contracts on the B3 Exchange on November 7 following Donald Trump’s victory in the US. A total of 232,000 futures contracts were transacted during the day. (Portal do Bitcoin)
Min Lin, Bitget’s new chief business officer and head of Latin America, spoke with CoinTelegraph Brasil about the exchange’s plans to grow its presence in the country.
Interest in bitcoin in Brazil in 2024 tops that of the US and Canada, according to Google search data. (Livecoins)
Google announced new integrations with Pix for its Google Pay product, including contactless Pix payments, Pix for online purchases and more. (CoinTelegraph Brasil)
The Central Bank will launch offline Pix via NFC and a new function to track and block in cases of fraud. (CoinTelegraph Brasil)
Brazilian analysts are bullish on the crypto market’s direction following the Trump victory last week. (CoinTelegraph Brasil)
ETFs are the main vector of innovation in Brazil’s capital markets, CVM director Daniel Maeda said at an event promoted by Dow Jones:
“We have already had concrete examples of this, with cryptoasset ETFs - bitcoin, solana - and international strategy ETFs. I believe that these funds will continue to play this role, as a test for more complex investment theses in the market, because they are vehicles that allow for closer monitoring, thanks to the transparent dynamics of the class.” (Valor Investe)
VIRTUAL, GOAT, SOLCEX and VISTA were among the top memecoins traded by Brazilians in the leadup to the US elections. (CoinTelegraph Brasil)
The Kazan Declaration, the official document produced following the XVI BRICS Summit, made no mention of a common digital currency or the use of blockchain or cryptocurrency technology despite being a prominent theme discussed at the Summit last month. (CoinTelegraph Brasil)
SMU Investimentos and Estar completed the first full cycle of a token issuance, payouts and burn within the CVM’s regulatory sandbox. MUD1, a fixed income token used for fundraising by Grupo Muda, raised a total of R$600,000 and paid out a total of R$733,981 before concluding. (CoinTelegraph Brasil)
📲 Adoption
Kinexys, the blockchain division of JPMorgan (formerly Onyx), used Parfin’s Rayls (among other chains) in a proof of concept to test blockchain privacy and digital identity in the funds industry. (BlockNews) (BeinCrypto) (CoinTelegraph Brasil)
Rodrigo Marques, the architect of the Atlas Quantum crypto pyramid scheme who successfully fled the country, was spotted on the streets of Beverly Hills, California — where he has been living in a mansion for the last three months. (Livecoins)
Brazil has seen among the highest levels of growth in Web3 developers since 2018, according to the Electric Capital Developer Report 2024. (CoinTelegraph Brasil)
The Brazilian Banking Association (ABBC) began testing Microsoft’s zero-knowledge proof privacy protocol (ZKP) as part of the Drex pilot. (CoinTelegraph Brasil) (CriptoFacil)
Exame highlights 8 Brazilian blockchain projects worth keeping an eye on
Satsconf, Brazil’s largest bitco-focused event, took place November 8-9 in Sao Paulo. (Exame) (BeinCrypto)
Only 0.07% of Brazilian politicians own cryptocurrencies, according to a new study by Paradigma Education. Just 325 of the 463,000 candidates up for election in 2024 declared having some type of crypto. Paradigma Felipe Sant Ana
“Crypto is the most underrepresented asset class in national politics. A few percent of Brazilians have crypto, compared to a few hundredths of a percent among politicians. This doesn't seem healthy to me, because it's hard to legislate on something you don't really know about.” (Portal do Bitcoin)
🏛 Policy, Regulation and Enforcement
A man was murdered at Sao Paulo’s Guarulhos airport last week for allegedly taking money from the Primeiro Comando da Capital that was supposed to be invested in cryptocurrencies and instead using the funds to buy real estate on the Sao Paulo coast. (Valor) (Portal do Bitcoin)
Júlia Zanatta, a federal deputy from Santa Catarina, intends to file an action to block the Central Bank’s Drex plans from moving forward. She argues that the project is “a centralized digital currency controlled by the Central Bank that can and will be used to impose restrictions on Brazilian citizens.” She says that such a project requires approval by the legislative branch to move forward. (CoinTelegraph Brasil)
Former president Jair Bolsonaro lent his support to Zanatta’s effort, arguing that Drex puts too much control into the hands of a single institution. (Livecoins)
Federal Police initiated Operation Profeta in Rio de Janeiro and Sao Paulo targeting a group accused of running cryptocurrency and forex scams that have harmed 10,000 investors to the tune of R$260 million (US$45 million). The main target was “bitcoin coach” Rodrigo dos Reis — who ran a company called RR Consultoria that stopped paying clients in 2022 and was considered to be a pyramid scheme. (Valor) (Portal do Bitcoin) (BeinCrypto) (BlockTrends) (CoinTelegraph Brasil)
The Attorney General of the Republic, Paulo Gonet, is expected to file a lawsuit against the Supreme Federal Court seeking to prevent the regulation of sports betting — which is scheduled to enter into effect in January. Legitimizing these platforms, he argues, would be injurious to the country’s citizens. (CoinTelegraph Brasil)
The CVM issued stop orders against four platforms offering securities, FX and cryptocurrency investment products. (CoinTelegraph Brasil)