🇧🇷BCR #100: Pharaoh of Bitcoins speaks; Crypto Twitter revolts over Digital Real
🇧🇷BCR #100: Pharaoh of Bitcoins speaks; Crypto Twitter revolts over Digital Real
GAS Consultoria founder tells Congress he's innocent; maxis reject Digital Real's centralized components
Olá pessoal!
Greetings from Ilha de Marajó at the mouth of the Amazon River enjoying a nice getaway week. Definitely one of the most unique and novel places I’ve ever visited in Brazil or anywhere else for that matter. Would recommend checking it out if you ever have the opportunity.
With that, welcome to 🇧🇷Brazil Crypto Report for the week of July 10-14, 2023
-AWS
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Digital Real Revolt on Crypto Twitter
News emerged late last week that the Digital Real pilot's underlying code will allow the Central Bank to disable token transfers; increase, decrease, burn and freeze balances in wallets, and make transfers to other other wallets.
Obviously these are the types of features that make cypherpunks, privacy advocates and crypto libertarian types uneasy, and that sentiment raced through Twitter last week.
The functionality was flagged by blockchain developer Pedro Magalhães, who looked through the code posted in the Digital Real GitHub repository. (The features were also announced during a June 26th technical Digital Real Forum meeting) The revelation then began to go viral among various clout farmers on Twitter → including this one from a supposed 21 year-old YouTuber that got one million views.
Bitcoin maximalists and anti-CBDC voices on Twitter quickly jumped on the narrative as a way to take some easy shots at their tribal opponents, even turning the guns against Ethereum creator Vitalik Buterin.
Reformed bitcoiner Nic Carter chimed in with a dose of sarcasm
To partially quell the uproar, Mercado Bitcoin’s Fabrício Tota argued out that the Digital Real “superpowers” are the exact same as those used currently by other stablecoins like Tether or USDC, and that a crucial feature of a digital currency like this is to uphold the integrity of the financial system.
Unlike bitcoin, the Digital Real is a state-controlled, centralized currency and therefore will have certain centralized features.
Another overlooked point here is that the Digital Real will be a wholesale CBDC that will be used to settle interbank transactions and not a currency that everyday citizens will be interacting with. However, it appears that the freezing functionality would also apply to Tokenized Reals that will be issued and distributed by financial institutions to their customers.
For its part, the Central Bank responded saying that the Digital Real system must comply with existing laws that allow the freezing of financial assets once proper legal procedure (ie a court decision) has been followed:
““According to Brazilian legislation, the courts, in the proper conduct of legal proceedings, have the prerogative to freeze or arrest amounts held in the (National Financial System). These functionalities, therefore, currently exist in the (National Financial System) and should be reproduced on the digital real platform in order to guarantee its compatibility with the legislation in force.”
Importantly, the bank added that it plans to incorporate this functionality into the final version of the Digital Real, not just the pilot.
(Valor) (InfoMoney) (Portal do Bitcoin) (Exame) (CoinTelegraph Brasil)
Congressional inquiry into crypto pyramids kicks into high gear
(Before I dive in here, I’d like to distinguish the two types of individuals being called to testify in from of the CPI committee. I tried explaining this in last week’s edition but apparently I didn’t do a great job per feedback I received from several of you.
The CPI is “summoning” numerous witnesses who are directly or indirectly involved in Brazilian cryptocurrency pyramids, or are suspected of engaging in some sort of shady behavior. The committee is “inviting” subject matter expert witnesses to help the committee better understand this new industry and technology. Apologies for anyone confusion around this)
“Pharaoh of Bitcoins” Glaidson Acácio dos Santos, alleged mastermind of the GAS Consultoria pyramid, teleconferenced in from the Catanduva prison in Paraná and denied any wrongdoing to the committee despite being labelled by Deputies as a type of “Bernie Madoff from Brazil”:
“I'm not a pyramid, I wasn't a pyramid and I won't be a pyramid.”
He stated that while his company invested customer funds in cryptocurrencies, the contracts he brokered with his customers did not allow for full redemptions due to “market risk”.
Meanwhile, Glaidson insisted that GAS clients were paid regularly until company accounts were blocked by authorities - thus pinning the blame on Federal Police and stating that he’d be able to pay back his customers once the accounts are unfrozen:
““People committed suicide. They stopped paying for medical treatments. All because of the PF stoppage that caused this disaster. It left several people in a vulnerable situation,
“By unlocking what is on Binance and the other platforms, taking what was hijacked by the PF, GAS resumes its activities…Once I have access to the seized wallets, I will pay people.”
Glaidson also denied any involvement in the murder of Wesley Pessano, operator of a competing Cabo Frio-based cryptocurrency pyramid, in August 2021. Authorities allege that Glaidson ordered the hit.
Santos also stated that he spoke with the CVM several times during his time operating GAS and also noted that several CVM employees were, in fact, GAS clients themselves.
“Sheik of Bitcoins” Francisley Valdevino da Silva was supposed to testify on July 13 obtained a Habeas Corpus ruling allowing him to remain silent for the time being
Responses from football clubs in regards to their fan token programs have begun to roll in
The CPI will reimburse travel expenses to Brasilia for summoned individuals
The CPI invited executives and directors from BS2, Latam Gateway and Méliuz to testify in regards to their companies’ connections to Binance, Portal do Bitcoin reported, with the justification that Binance uses a:
“measure to, roughly speaking, disguise the way it relates to companies incorporated here and, more worryingly, to individuals who buy and sell crypto assets on its platform”
“Such a model prevents the effective monitoring of the Central Bank of Brazil and the Federal Revenue Service of Brazil, leading us to understand that there is no collection of taxes due, statement of movement of exchange operations, among other banking and financial actions.”
Valor has an up to date list of individuals invited or summoned by the committee.
(InfoMoney) (Portal do Bitcoin) (CoinTelegraph Brasil)
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🎙New 🇧🇷BCR Podcast Episodes
This week’s episode is a recording of a live panel I hosted at the Digital Finance Brazil/BlockchainSP event in June. This rock star panel included AB InBev Vice President Daniel Tartaro, Bitso Brasil CEO Thales Freitas and fintech expert Bruno Diniz. Have a listen via the Substack link below or on Spotify, Apple Podcasts or Anchor.
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🗞Brazil Crypto News Rundown
📈 Markets
1.9 million unique individuals traded cryptocurrencies in May, according to Receita Federal data - almost three times higher than May 2022.
Meanwhile, more than 80,000 companies reported crypto trades to the agency, more than double the prior-year figure.
Total reported trading volume for the month checked in at R$16.2 billion (US$3.4 billion), down 10 percent year-over-year and down 26 percent from April 2023
Nearly R$4 billion of the total volume took place on overseas exchanges and via peer-to-peer transactions
USDT volumes reached R$12.8 billion for the month, representing 79 percent of total volume for the period. (Valor) (Portal do Bitcoin) (Exame)
Nubank has partnered with Fireblocks to provide blockchain technology related services for projects including Nubank Cripto’s own custody solution and including the Digital Real pilot. Nubank Cripto head Thomas Fortes told Valor:
“The decision was taken primarily with a view to continuing to invest in our value proposition of security and solidity through proprietary custody. In addition, we are excited about the possibility of exploring new blockchain solutions in the future, such as the digital real project.”
SMU Investimentos issued R$1 million in a commercial note token offering commissioned by real estate startup More.co. The token, the second issued by SMU, will be listed on SMU’s startup platform - which is part of the CVM regulatory sandbox. (Valor)
Bybit announced the listing of real-pegged stablecoin BRZ, issued by Transfero. Brazilian users will be able to transfer funds directly to Bybit, buy BRZ and use the currency with no cost in the first month. (CoinTelegraph Brasil)
Digital wallet NG.Cash enabled beta BTC and ETH trading for certain customers.
The product, which has a payments license from the Central Bank, is targeted at “Gen Z” users born between 1995 and 2010 and has more than one million users after less than two years of operation.
The expectation is that by the end of August the service will be available to all customers
Parfin will provide the underlying custody and brokerage services
Users will be able to purchase crypto for as little as R$1
CEO Mário Augusto Sá said in a statement:
"This new service offering will provide Generation Z with a democratic and integrated experience in the world of cryptocurrencies, combined with the security and reliability of NG.Cash." (Valor) (Portal do Bitcoin)
Órama Singular, the wealth and asset arm of Órama Investimentos, launched an actively managed multimarket fund called Block3 in April 2022 focusing on digital assets. Since launch, it has returned 23 percent against a 34 percent drop in bitcoin and a 49 percent drop for ETH. (Valor)
The biggest losses in the Brazilian crypto ETF world this year have come in the metaverse and NFT spaces, according to an analysis commissioned by Exame. The iVi Crypto Quant fund, for example, has suffered a cumulative loss of 97 percent for the year.
Gremio’s fan token offering sold out 200,000 units in less than 72 hours. (CoinTelegraph Brasil)
📱Adoption + Digital Real
Ernst & Young presented its privacy-focused Starlight open source solution to the Brazilian Central Bank for potential use in the Digital Real project. The protocol uses zero-knowledge proofs to guarantee privacy and bank secrecy sensitive information involved in Digital Real transactions. The Bank reportedly intends to test three different privacy solutions in the pilot. (Valor)
Mastercard’s participation in the Digital Real project “makes total sense” given the company track record in payments innovation and that it sees the initiative with “good eyes”, senior vice president Leonardo Linares told Exame.
“If Real Digital is a success, it legitimizes the tokenization solutions that will come in tow. a super formal example, a relevant case of scale, such as a CBDC, will bring security and credibility to the tokenization technology.”
Exame’s João Pedro Malar has a good Digital Real explainer for those looking to get up to speed quick.
Bradesco announced that Núclea will be included in its Digital Real pilot consortium. Nuclea is a payments and banking technology infrastructure provider. (CoinTelegraph Brasil)
Brazilian wine importer El Vinos has created a utility token digital currency called VinoCoin to strengthen its community of wine enthusiasts in the country. (Valor)
Gisele Bundchen’s ex-husband Tom Brady will be a keynote speaker at the Expert XP conference, organized by XP Investimentos and taking place September 1-2 in São Paulo. (Portal do Bitcoin)
“Tokenization as a service” offerings will be part of the next wave of fintech business models in Brazil, argues Pomelo COO John Paz. (CoinTelegraph Brasil)
Decentralized science and Web3 startup Sthorm announced the second edition of ViralCure Festival in Sao Paulo. (CoinTelegraph Brasil)
NFTs, Metaverse and Games
Globoplay, Rede Globo’s free streaming platform, launched its second collection of NFTs to promote the series “Xuxa, o Documentário”. TheThe set is called “Xuxaverso” and is named after singer Xuxa Meneghel. 20,000 total NFTs will be distributed, and the collection will feature 60 different NFTs commemorating the network’s 60th birthday. (Valor) (Portal do Bitcoin)
VEX, a Web3 fashion-oriented spin-off from Lumx Studios, announced a partnership with hardware wallet provider Ledger. (Exame)
Metaverse platform Upland, actress Deborah Secco and the Stock Car Pro Series competition announced a partnership for “phygital” experiences for motorsports fans. (BlockNews)
🏛 Policy, Regulation and Enforcement
ABCripto co-signed a letter with five other industry associations urging that more staffing positions be opened at the Brazilian Central Bank and CVM, arguing that the total number of public servants employed by these entities has shrunk in recent years. The total number of new positions requested are 545 at the Central Bank and 180 at the CVM. (Valor) (CoinTelegraph Brasil)
ABCripto and ABFintechs representatives met with Central Bank director Renato Dias de Gomes on Tuesday July 11, according to the bank’s public diary, to discuss implementation of the new crypto law and the influx of so-called “crypto-as-a-service” platforms. Representing ABCripto in the meeting was Bernardo Srur and Julien Dutra. (Portal do Bitcoin) (CoinTelegraph Brasil)
Alleged pyramid scheme Midas Trend is attempting a re-launch as a bot that supposedly helps people place winning bets at online casinos. The company operated an investment scheme using a cryptocurrency trading bot in 2018-19 that resulted in the loss of R$55 million worth of customer funds. (Portal do Bitcoin)
Authorities will again attempt to auction the seized assets of Braiscompany founders Antonio Neto Eis and Fabricia Campos in mid-August, after the first two attempts produced zero bids. (Portal do Bitcoin)
Federal Police launched Operation Bahamut on July 12 in an attempt to dismantle a gang that has laundered R$2 billion using cryptocurrencies since 2017. Eight individuals were arrested in the operation. (Portal do Bitcoin) (BeinCrypto)