🇧🇷BCR #48: One Year Anniversary Edition 🎉
🇧🇷BCR #48: One Year Anniversary Edition 🎉
Plus, Brazil crypto legislation at an impasse; NFT.Rio makes a splash; Binance/Capitual dispute drags on
Fala pessoal!
Welcome to the one-year anniversary edition of 🇧🇷Brazil Crypto Report for the week of June 27 - July 1, 2022. I spun up this Substack a year ago with the assumption that Brazil was absurdly underrepresented in the crypto ecosystem mindshare and that there’d be significant value created by spinning up an English language resource on the market.
A year later, I’m still here doing this, and I’m pretty sure that I’ve proven my original thesis to be correct. So first and foremost I’d like to thank everyone for reading and supporting this publication. It’s been a fun ride thus far and I’m excited to keep this going as we plow ahead through the bear market.
NFT.Rio is proving to be a big hit, with art displays from Cozomo Medici (aka Snoop Dogg), Bored Apes, CryptoPunks, CryptoRastas and other popular NFT collections.
Mercado Bitcoin is using the opportunity to host an NFT auction benefiting various impact projects that it is supporting, such as Hungry NFTs - which aims to fight hunger in Brazil, Metaverso Chapadão - which contributes to education for vulnerable children, and NFT Keepers - which helps promote Pantanal biodiversity. MB is also distributing exclusive NFTs to all attendees who have an MB account.
Saori Honorato of Portal do Bitcoin had some good write ups if you’re keen to follow the happenings. My personal favorite was this one highlighting children, age 7-11, from the Complexo do Chapadão favela who were invited to the event to see their artwork turned into real-life NFTs. Other prominent themes from the event included diversity, music and artificial intelligence.
🏛Brazil’s crypto legislation appears to have hit an impasse, with reports emerging this week that the Banco Central is not happy about the changes proposed by Deputy Expedito Netto, who is the rapporteur for the bill in the Chamber of Deputies. Netto is looking to remove several items that were added to the text by the Senate.
There are two major points that the Banco Central is taking issue with, per reporting by Folha de S. Paulo. The first is the proposal to remove a provision requiring that exchanges segregate customer assets and restrict what types of activities these funds can be used for. This type of rule is common in traditional financial markets and would, in theory, ensure that customers could recover assets in the event of an insolvency. Brazilian exchanges like Mercado Bitcoin support this rule, while Binance reportedly considers it to be too broad and untenable.
Given what’s happening across the broader crypto market, this is probably a conversation worth having.
The second point of objection is the removal of the requirements for crypto brokers to report transactions above R$10,000 to the Financial Activities Control Council (COAF). This is another rule that traditional financial entities must abide by. With this obligation removed, exchanges would only be required to report monthly operations above $35,000 to the Receita Federal - a rule that is already in place for exchanges operating in the country.
Proponents argue that removing this provision would impair the ability to fight money laundering and financial crime with cryptocurrencies.
🤔Another point of confusion is that Netto is reportedly looking to strike a provision from the Senate text that would require companies to be in compliance with the law immediately upon it being signed into law rather than a standard 180 day transition peiod, thus delivering a win for domestic exchanges against overseas exchanges. However, upon further digging, the approved Senate language does in fact include a 180 day transition window, so I’m entirely certain what this dispute (which I highlighted in a previous newsletter) was entirely about. Will keep an eye on this.
🚨The dispute between Binance and payment processor Capitual lumbers into its third week as customers are still unable to withdraw or deposit reais on the platform using Pix or Ted. A new report from Portal do Bitcoin revealed that Binance in mid-June sued Capitual in an attempt to force the processor to continue providing deposit and withdrawal services after the Banco Central modified requirements for collecting customer information.
Binance secured a favorable decision from Judge Caramuru Afonso Fransisco of the 18th Civil Court. However, the São Paulo Court of Justice then overturned the 18th Civil Court’s decision. Further details of the legal proceedings are unknown as most of the process is being carried out in secret.
The drama began on June 17 when users began to report that withdrawal and deposit services had been interrupted.
The consequences appear to be palpable. Binance’s market share in the Brazil market since June 17 has fallen from 57% to 41%, according to a surveys carried by Portal do Bitcoin and data from its price portal. The big winners have been NovaDAX (5% to 13% of market share), Mercado Bitcoin (5% to 7%), BitPreco (17% to 18%).
Portal do Bitcoin is owned by Mercado Bitcoin/2TM, one of Binance’s main rivals in the Brazil market, though its editorial functions are independent of its ownership. Read into that what you will.
Isac Costa of Ibmec and Insper penned an insightful column for InfoMoney discussing the path forward for Binance with Latam Gateway given the stigma of money laundering investigations that currently overshadow the exchange in various jurisdictions around the world (Binance has denied any wrongdoing). He also shared some theories as to what prompted the Binance - Capitual breakup. Worth a read if you have the time. I also have a podcast recording with Isac coming out discussing Brazil crypto legislation so stay tuned for that.
🤯Lastly, Folha de S. Paulo reports that the founder of Capitual may have helped “Pharoah of Bitcoins” and GAS Consultoria founder Glaidson Acacio dos Santos liquidate R$228m (US$43m) worth of crypto into BRL after his arrest last year. This would have taken place via his lawyer Eliane Medeiros da Lima, who was arrested in February, and Malta Intermediação de Negócios e Consultoria Ltda.
Folha reports that Malta partner Guilherme Silva Nunes is also the founder, partner and director at Capitual, which was until recently Binance’s payment processor in Brazil.
Capitual denied that it had any role in the operations carried out by Malta and Medeiros and that it began blocking her transactions once her involvement in GAS. In response to questions about this relationship, Binance told Portal do Bitcoin the following:
“Binance points out that its world-renowned investigative team works in constant coordination with local authorities. This includes working with the Federal Police to bring Glaidson Acácio dos Santos to justice in 2021, freezing his accounts and identifying potentially illicit revenue streams across multiple platforms around the world.”
🎙Be sure to check out the latest episodes of the 🇧🇷Brazil Crypto Report podcast. I sat down with Conduit Financial CEO Kirill Gertman to discuss the role that yield products play in the Latam crypto exchange market and how to best protect investors against the crazy stuff we’ve been seeing the last few weeks with CeFi providers.
I also chatted with Fuse Capital co-founder João Zecchin about his firm’s forthcoming crypto fund, which would be the first dedicated crypto fund in Brazil.
🙏 Thanks to our partners at HBAR Foundation for supporting 🇧🇷 Brazil Crypto Report! If you're a Latam entrepreneur or developer with an up-and-coming project or idea and need some support, take a look at the HBAR grant program. They're seeding projects focused on DeFi, fintech, NFTs, sustainability and so much more. They also offer a plethora of other resources to help builders bootstrap. Do yourself a favor and check them out! 👊
🗞Brazil Crypto News Rundown
📈 Markets
Anbima, a trade group representing financial and capital market firms in Brazil, announced a self-regulatory scheme for crypto funds with the objective of protecting retail investors. The scheme is expected to commence in the second half of 2022. (CoinTelegraph Brasil)
QR Asset Management’s QBTC11 bitcoin ETF surpassed 1,000 total bitcoins under custody. (MoneyTimes)
Bitcoin was the worst-performing asset for Brazilian investors for the first half of 2022 ☠️, down 62.3% in reais. (CoinTelegraph Brasil)
Mercado Bitcoin announced the launch of another asset token, MBFP09, on its platform yields an estimated 18% per year. 29,604 of the tokens will be offered at a unit value of R$100 each. The new token comes after its previous similar offering sold out in 24 hours. (CoinTelegraph Brasil) (Portal do Bitcoin)
MB Tokens is launching two credit rights investment funds in partnership with asset manager FIDD. The first fund will acquire traditional credit rights, assign financial flows that will be tokenized and offered as digital fixed income. The second fund is for accredited investors and will acquire tokens backed by consortium quotas. (Portal do Bitcoin)
Foxbit listed Coffee Coin, a token created by Stonoex and the coffee cooperative Minasul that is indexed to the value of coffee in the global market. (CoinTelegraph Brasil)
Brazilian DeFi protocol Pods Finance has created a means by which users can mitigate devaluations of airdropped tokens. (CoinTelegraph Brasil)
📱Adoption
Paxful will pay R$1,300 each for 12 Brazilians to learn about bitcoin and financial education as part of its AfroBit_lab program, in partnership with Instituto Guetto. The scholarships will be targeted at the black population in Brazil. Paxful CEO Ray Youssef said in a statement:
“Bitcoin is one of the most powerful tools in the world for financial freedom. Together, Instituto GUETTO and Paxful are teaming up to build real financial opportunities for real people who are often left behind by the traditional financial system. We are expanding our global commitment to Bitcoin education through AfroBit_lab and revolutionizing the way black people in Brazil can access more tools and resources to thrive.” (CoinTelegraph Brasil) (Portal do Bitcoin)
Mercado Pago now allows users to deposit bitcoin, Ethereum and Pax dollars from external wallets, though asset withdrawals remain unavailable. (Portal do Bitcoin)
São Paulo Football Club launched its own innovation hub called Inova.São. The objective is to develop and implement disruptive technologies that will lead to increased revenues and competitiveness, such as NFT ticketing, a governance token and other web3 projects. (CoinTelegraph Brasil) (Exame)
Payments provider Cabital, which works with global crypto exchanges like Bybit, announced a partnership with Transfero allowing for the integration of BRL onto its platform. This means that Brazilian users can deposit and withdraw reais using Pix or Ted on Cabital-supported exchanges. (CoinTelegraph Brasil)
QR Capital is hiring for 16 new positions despite the market downturn. (Money Times) (Portal do Bitcoin) (Valor Investe)
Brazilian crypto exchange BlueBenx will begin operating in Portugal in September. (Estadao)
Hackers briefly took over the Flamengo YouTube channel and broadcast a fake livestream interview with Microstrategy CEO Michael Saylor. (Portal do Bitcoin)
Lucas Inutilismo, a Brazilian musician and influencer, had his Twitter account hacked and turned into a fake homepage of The Sandbox. (Portal do Bitcoin)
Hacking.Rio will take place in conjunction with Blockchain Rio September 1-4 with a focus on the metaverse. (BeinCrypto)
CriptoFácil and BitNada are teaming up to host the “Bit in Rio” IRL event on November 26. (CriptoFacil)
NovaDAX is sponsoring the 2022 Stock Car Pro Series, becoming the first Brazilian exchange to sponsor a major auto racing event. Thaís Marques, NovaDAX head of marketing, commented:
“We are very happy to be the first Brazilian exchange to sponsor the main motorsport category in South America and Brazil. We have the educational role of sharing knowledge about the cryptocurrency market with Brazilians and for that we always seek the path of innovation. Nothing better than sport to make this connection.” (Portal do Bitcoin)
Mercado Bitcoin users can now receive crypto directly on their phone via its app. The service had previously been available on the website but can now be done through on mobile. (Portal do Bitcoin)
Brazil’s telecomms regulator Anatel approved a new machine used for Helium mining in the country. (CoinTelegraph Brasil)
InfinitePay, the solutions network offered by Cloudwalk, is launching a cashback rewards program during NFT.Rio for users of its NFT collector app. The rewards are earned on transactions using BRLC, a Cloudwalk-issued stablecoin pegged to the real. (CoinTelegraph Brasil)
Brazil’s Ministry of Agriculture is looking to hire a blockchain and cryptocurrency specialist for a 180 day contract. (Portal do Bitcoin)
MIBR, a Brazilian eSports organization, announced its own fan token via a partnership with Socios. (BeinCrypto)
🎮 NFTs, Gaming and Metaverse
Legendary bossa nova singer Gilberto Gil celebrated his 80th birthday by launching an NFT collection called Gil Futurível. (CoinTelegraph Brasil)
Seleção Brasileiro footballer Richarlison is launching his own NFT collection, created by International Digital Group. (Money Times)
Brazilian musician Dada Yute is launching three NFT collections on the Mercado Bitcoin marketplace. The collections will be respectively named “a call to decentralization”, “Cryptoyabas” and “Black Angel”. (CoinTimes)
Folha de S. Paulo ran an article highlighting NFT adoption and displays by Brazilian artists, such as Beto Gatti and Livia Elektra, who both had their works on display in New York.
Brazilian singer Pitty released her first NFT collection featuring never-before-seen moments and experiences from her 20 year career. 4,300 individual units will be made public. (CoinTelegraph Brasil)
Angra, the Brazilian heavy metal band, announced a partnership with startup DaX to launch its own fan tokens. (CoinTelegraph Brasil)
A new metaverse-themed bar in São Paulo is giving out NFTs for customers’ birthdays. (CoinTelegraph Brasil)
🏛 Public Policy, Regulation and Enforcement
Digital identity firm joined ABCripto - a trade group comprised of various Brazilian exchanges and service providers, bringing the group to 12 total members. (Portal do Bitcoin)
Digital bank Capitual is suing Itaú for blocking its bank account and funds in 2021. (Livecoins)
InfoMoney has a wild profile on Francis da Silva, aka the “Sheik of Bitcoins”, who ran a massive bitcoin pyramid scheme that spanned more than 100 individual businesses. The scheme, which promised monthly returns of up to 13.5%, ultimately resulted in 500 civil lawsuits filed against the Sheik for a total of R$100m (US$19m) in damages.
Silas Malafaia, a popular Pentecostal paster and author, revealed that he was a partner of the Sheik of Bitcoins’ RentalCoins pyramid scheme, but abandoned the partnership once he learned about the company’s defaults. He claims to have joined the partnership in an attempt to raise funds for his church. (CoinTelegraph Brasil) (Portal do Bitcoin)
The Sheik is also being sued by Willian Herculano, a professional model who was “Mister Brazil” in 2016, after he reportedly lost R$58k on RentalCoins after entering into a service agreement with the company in December 2021. (Livecoins)
The US Commodity Futures Trading Commission has filed suit against Cornelius Johannes Steynberg, a South African national who was arrested in Brazil in December. Steynberg was CEO of suspected crypto pyramid scheme Mirror Trading International. CFTC said in a statement:
“Steynberg created and operated, through MTI, a global pool of foreign currency commodities that only accepted Bitcoin to buy a stake in the business, worth more than $1,733,838,372. It is the largest fraudulent scheme involving Bitcoin that the CFTC has prosecuted so far”
Brazilian model Sasha Meneghel (daughter of TV and film personality Xuxa Meneghel) and her husband, gospel singer João Figueiredo, also fell victim to the Rental Coins scam. The couple invested a reported R$1.2m (US$230k) into the pyramid scheme. (Folha de S. Paulo)
Gustavo Cunha penned a column for InfoMoney discussing potential benefits of a Digital Real
The Public Ministry of Santa Catarina prohibited 13 members of Go Capital, an alleged cryptocurrency pyramid scheme, from communicating with clients, pursuant to warrants issued in 2020. An estimated 3,500 investors were harmed to the tune of R$7m (US$1.31m) in the scheme. (Livecoins)
BeinCrypto published a helpful summary of the Banco Central’s latest thinking for how the Digital Real would function in practice, sourced from a paper penned for the Bank of International Settlements by Fabio Araujo.
A US Federal Court in Florida indicted Emerson Pires, a Brazilian citizen, for participating in a cryptocurrency pyramid scheme that moved US$100m. Another Brazilian national, Flávio Gonçalves, was also indicted. The case is reportedly being investigated by the FBI. (MoneyTimes) (UOL)
Federal Police announced the creation of a new Special Cyber Crime Investigation Unit which will, among other tasks, investigate the use of digital assets by criminal organizations. (Portal do Bitcoin)