#167: Chainlink enters the Drex CBDC pilot
Plus: Receita Federal has info on overseas tx; Drex will be decentralized, BC says
Olá pessoal!
Welcome back to 🇧🇷Brazil Crypto Report for the week of November 18-22, 2024, and welcome back to the bull market! It’s been a long, dry season for many of us but our patience appears to be paying off.
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🔎 What’s in this week’s BCR?
Chainlink enters the Drex CBDC pilot
Drex will not increase control over the population, Central Bank says
Every exchange operating in Brazil must be authorized: Central Bank
Crypto ETFs on the B3 hit all-time highs
Receita Federal says it has data on overseas crypto holdings
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Drex will not increase control over the population, BC says
While some have criticized the Brazilian Central Bank’s CBDC project as a potential lever for increasing government scrutiny and control over everyday citizens, bank officials argue that this is not the case.
Fabio Araujo, Drex coordinator at the bank, argued that this won’t be possible because Drex is decentralized — with participants operating their own nodes — and does not involve a state-run KYC process for everyone using the platform.
Speaking at the Criptorama event hosted by ABCripto, he said:
“Participants operate nodes and we do not KYC anyone. On top of the pseudo-anonymity that already exists on the network, if we manage to implement a ZKP solution [zero-knowledge proof privacy solution] it will be impossible to individually look at transactions. Only the bank can do this, as is already the case today.”
New participants will need to continue joining the platform to further decentralize, it was noted.
Araujo also emphasized that the bank has “nothing against” the cryptocurrency markets despite its development of Drex:
"We have nothing against the cryptocurrency market. The market is using digital asset technologies to manage risks and meet different demands. For example, some prefer more centralized solutions and others opt for decentralized alternatives. This depends on individual preference and the specific needs of the business.
We are working to ensure that, regardless of the model chosen, security is preserved within these environments. These technologies offer a new environment, an additional alternative for the population, expanding the options available. This is, from my point of view, an important opportunity to foster innovation and inclusion.”
He further explained that the bank’s goal is to bring the easy-to-use nature of cryptocurrencies into the traditional financial world, noting that Brazilians are currently more likely to invest in cryptos or bets than fixed income products or government bonds:
"It is easy for the user to access digital assets: just open an application, make the transaction and that's it. This simplified experience, combined with the ease of integration with digital channels such as banks and brokerages, is a crucial point that DREX seeks to incorporate into the system.”
Valor CoinTelegraph Brasil Portal do bitcoin CriptoFacil Livecoins BeinCrypto
Every exchange operating in Brazil must be authorized by Central Bank, Damaso says
As the Central Bank looks to rollout legislation that will regulate cryptocurrency exchanges in 2025, director of regulation Otavio Damaso asserted that companies operating in the country must receive authorization from the authority.
However, he recognized that there will be companies operating in Brazil that do not want to fall under this mandate. This effectively rules out the hypothesis that international exchanges could continue operating in Brazil without complying with rules published by the BC.
Speaking during a seminar by the Administrative Council for Economic Defense, he said:
“We don't even know how many cryptocurrency exchanges there are in the country and all of them will have to be authorized and supervised by the Central Bank….We will probably have a marginal market that will require major action.”
Carolina Bohrer, head of financial system organization at the Central Bank, urged market participants to get ahead of the licensing game by getting an independent audit done.
“If I can give one piece of advice to anyone who is thinking about filing an authorization request for when the [crypto market] regulations come out: hire an independent auditor and audit the balance sheet to start the conversation.
“You will need to be audited later, when you become regulated. So I think it is an action that makes sense and will help everyone to see what the best structure is and have time to adjust any problems that are identified”
Antonio Guimaraes, a consultant at the bank spearheading development of crypto regulations emphasized that this ongoing round of regulation is only the start:
“Regulation does not stop here. There is already an intention to delve deeper into some topics, such as stablecoins, which involve a specific degree of risk because they have an impact on the monetary policy of countries like Brazil.”
Valor CoinTelegraph Brasil Portal do Bitcoin Livecoins Livecoins
Crypto ETFs on the B3 hit all-time highs
Several crypto ETFs trading on Brazil’s stock exchange reached all-time highs as a result of the post election run-up.
Hashdex’s HASH11 hit R$3.95bn in net asset value, while its BITH11 fund hit R$1.5bn.
Of the 17 crypto-related ETFs trading on the exchange, only 10 didn’t reach all-time highs last week
Chainlink enters Drex pilot program
The oracle provider announced its entry into the consortium being run by Banco Inter, Microsoft and 7Comm.
The group will use Chainlink technology and oracles in supply chain management and trade finance processes by using Delivery vs Payment and Payment vs Payment
Specifically, it plans to implement automated settlement of agricultural commodity transactions across borders, platforms and currencies.
The Chainlink Cross-Chain Interoperability Protocol (CCIP) will generate interoperability between Drex and a foreign central bank to ensure that transactions are settled properly.
The consortium will test out a tokenized electronic bill of lading that triggers payments to exporters during the transport process.
Angela Walker, Global Head of Banking and Capital Markets at Chainlink Labs, said in a statement:
“We are excited to work with the Central Bank of Brazil, Banco Inter, and Microsoft to demonstrate how the adoption of blockchain technology, combined with Chainlink’s CCIP interoperability protocol, can transform trade finance.
“CCIP is essential to enabling secure transactions across borders, currencies, and blockchains and will help demonstrate the potential of tokenized assets at scale in this CBDC use case in Brazil.”
Portal do Bitcoin Chainlink Press Release CriptoFacil BeinCrypto
OKX: Brazil regulation leaves “much to be desired”
Brazil is a “sleeping giant” market as a variety of regulatory barriers are preventing it from fully opening up, OKX Brasil compliance lead Rodrigo Franca said during a panel at Criptorama.
Specifically, he noted that Brazil is behind due to its prohibition on crypto derivatives and futures:
“The country is one of the only giants that does not directly allow crypto operations with derivatives and futures contracts. Neighboring countries in Latin America already have stronger regulation. Brazil now has the chance, with the public consultations, to get closer to more mature markets.”
Receita Federal says it has data on overseas crypto holdings
Brazil’s tax authority says that it has information on bitcoin and crypto transactions carried out by Brazilians overseas and that it will begin charging taxes on these assets in 2026.
The announcement was made during an event at the Center of Industries of the State of São Paulo. It reflects a growing interest in collecting taxes on crypto trades undertaken on platforms based outside of the country.
🗞Brazil Crypto News Rundown
📈 Markets
The BRL1 stablecoin, created by a consortium that includes Mercado Bitcoin, Bitso, Foxbit and others, will begin trading on at least 20 international exchanges. The BRL-pegged asset aims to make it easier for clients to on and off ramp into crypto. (Valor) (CriptoFacil) (BeinCrypto) (CoinTelegraph Brasil)
Binance enabled Brazilians to purchase five new cryptocurrencies that can be purchased with credit and debit cards on its platform. (Livecoins)
Bitget’s new chief business officer Min Lin discussed the exchange’s Latin America expansion plans with Monique Lima of InfoMoney. He explained:
“Latin America has clearly become a strategic priority for us and we will continue to invest and grow here…in terms of local teams. Right now we are very focused on creating campaigns and products that attract Latin American users.”
Bitcoin-hoarding MicroStrategy is now worth US$26 billion, which InfoMoney notes is larger than the market value of Bradesco, one of Brazil’s largest banks.
📲 Adoption
BTG Pactual customers took to Reclame Aqui to complain about a bug in the bank’s app that showed their bitcoin balance at zero. (Portal do Bitcoin) (Livecoins)
Drex implementation challenges are far beyond just privacy; rather they have to do with adapting legacy structures which have existed for decades with new technology, bank executives from Itau and Santander said during a Criptorama panel. (CoinTelegraph Brasil)
The Central Bank expects to release the results from the first phase of the Drex pilot by the end of this year. (BlockNews)
Itau released a new study to better understand the cryptocurrency investing habits of Brazilians. (CoinTelegraph Brasil) (Livecoins)
A Brazilian classical pianist named Lord Vinheteiro was hospitalized after losing access to a Ledger wallet with 4 BTC. He then claimed that he was scammed while trying to recover the coins. (Portal do Bitcoin) (Livecoins)
Self-custody wallet Chainless, built by Brazilian startup Notus Labs, integrated six new networks, including Ethereum, Base, Arbitrum, Optimism and Avalanche. (CoinTelegraph Brasil)
“Blockchain Revolution” co-author Alex Tapscott gave an interview to Valor during a recent visit to Brazil.
Tether has opened up several programmer jobs based in Brazil (Livecoins)
Crypto exchange NovaDax went down on Thursday afternoon due to technical instability. (Portal do Bitcoin)
The Brazilian Notarial College revealed that it now has 8,000 living wills registered through its e-notoriado platform that uses Hyperledger Fabric. (CoinTelegraph Brasil)
Brazilian startup Absense announced a new platform for creating blockchain-based wills to be launched in Q1 2025. (CoinTelegraph Brasil)
The G20 Summit hosted in Rio de Janeiro suggested the creation of a task force on artificial intelligence to protect human rights, transparency, accountability, etc. (CoinTelegraph Brasil)
🏛 Policy, Regulation and Enforcement
The Central Bank expects to release a public consultation on stablecoins in 2025, and potentially another consultation on asset tokens. The announcement was made by bank consultant Antonio Guimaraes at Criptorama:
“There is already an intention to delve deeper into some topics. One of them is the regulation of stablecoins, which is an asset that involves a more specific degree of risk, because it has impacts in terms of monetary policy.” (Portal do Bitcoin)
“Bitcoin Coach” Rodrigo dos Reis was released from prison after just two weeks due to health problems. He is being investigated for operating a pyramid scheme that resulted in R$260 million (US$45 million) in losses to 10,000 investors. (Portal do Bitcoin)
Federal Deputy Kim Kataguiri introduced legislation that would prevent compulsive gamblers from accessing online betting platforms. (CoinTelegraph Brasil)
The federal government enacted a prohibition on sports betting advertisements directed at children and teenagers, in addition to requesting the blockage of 1,812 websites of illegal betting platforms. (CoinTelegraph Brasil)
The CVM issued a stop order against six companies offering cryptocurrencies in Brazil. (CoinTelegraph Brasil) (CriptoFacil)
The CVM is expected to issue a public consultation on crowdfunding in Q1 2025. (BlockNews)
Crypto exchange Bity announced that it has received the compliance seal from ABCripto. (BlockNews)