🇧🇷BCR #71: Digital Real Within Reach
Plus: Crypto.com receives payments license from Central Bank; US authorities eye the "Sheik of Bitcoins"
Ola pessoal!
Welcome to 🇧🇷Brazil Crypto Report for the week of December 12-16, 2022.
It’s another big news week as we wind down the year. We have developments regarding Digital Real development, Crypto.com obtaining a payments license and of course our old friend the “Sheik of Bitcoins”.
Have a great week everyone and thanks for reading!
-AWS
Banco Central Gives Digital Real a 2024 Launch Date
The Central Bank of Brazil announced that its Digital Real launch for usage by the broader population could take place as early as 2024. BC president Roberto Campos Neto made the announcement during an event hosted by Poder360.
"I think that this digitized, paid-in, integrated system, with inclusion, will help a lot in the development and inclusion of people in the financial world,
Campos Neto highlighted that the Digital Real’s innovative deposit tokenization architecture has become a model that other central banks around the world are following:
“When we said this for the first time, it was seen as something very different and very non-standard. In the end, we are flattered to think of a system that other central banks are now thinking too."
“I think that if we manage to achieve this, Brazil will be on the frontier of innovation in terms of financial intermediation and most likely there will be a lot of people looking at what we did and following our example.”
Tokenized deposit mechanism will transform bank deposits into tokens that essentially function as a stablecoin paired 1:1 to the Digital Real. These can then be used in various decentralized finance applications and blockchain protocols.
Campos Neto also re-remphasized that the Digital Real is part of the BC’s broader agenda of digitization and decentralization of the economy, which includes pieces like Pix and Open Finance. He highlighted that a critical next step for the Digital Real will be integration into these other components. Per CoinTelegraph Brasil, he stated:
“It is very important for it to be programmable so that you can add new functionalities, in PIX, in theory, you can put a smart contract on top of it.”
The benefits of the Digital Real constructed in this fashion, Campos Neto argued, include lower costs, greater inclusion, more competition, lower barriers to entry, tokenization of financial assets and contracts, data monetization and risk management.
"This is what we see in this digital economy in Brazil."
Campos Neto also stated that International Monetary Fund representatives have approved the Digital Real model and noted that it seems the easiest to implement vis-a-vis others, per Reuters.
Also, the transition from a Bolsonaro presidency to a Lula presidency should not have a significant impact on the BC’s Digital Real plans, Campos Neto assured, per Valor Investe:
"The Central Bank has autonomy, I stay in office for another two years. Most of these projects are not from a president or a team, they belong to the institution. I took a very good legacy from my predecessor, Ilan [Goldfajn]. This was a vision adopted by BC staff and will continue, regardless of the government, who the president is and the term of office."
Fireblocks Eyes Digital Real
In other Digital Real news, crypto custody and infrastructure unicorn Fireblocks reckons that it is among the most developed and well-thought out CBDC projects in the world.
Varun Paul, Fireblocks’ director of market infrastructure and CBDC, told InfoMoney:
“We have been watching developments [of CBDCs] around the world and Brazil is one of the most developed ones, so we are talking to the banks and the Central Bank to understand more about the ecosystem and seeing where we can leverage our technology to support them.”
CEO Michael Shaulov argued that the mechanism by which the Digital Real interacts with a stablecoin system is well ahead of other G20 CBDC projects. It is necessary to have this intermediation layer to prevent the Central Bank from fully controlling the financial system and credit issuance. The Digital Real’s focus on interoperability with other public blockchains is also quite different from what other nations are pursuing.
Fireblocks is involved in at least one of the Digital Real LIFT Lab projects and is in dialogue with the BC and other project leaders. Shaulov said:
“We are showing that we can bring real-life experience into the driver ecosystem. So it will no longer be just writing reports and we will show what we can do in real life.”
Banco Central Launches Tokenization Working Group
The BC also launched a new group, called GT Tokenização, to study activities related to registration, custody, trading and settlement of blockchain-based assets. The group’s responsibilities will include comparing Brazil’s work in this area to the international landscape, analyzing results of the BC’s LIFT Lab and the CVM’s regulatory sandbox, and studying the impact of blockchain technologies on services and market structure.
🏆World Cup Fan Token Watch 📈
While the majority of World Cup fan tokens have been in “down only” mode, the Argentina token (ARG) is up 136% over the last week ahead of its final match Sunday against France. The coin hit a new all-time high topping $7. Congratulations to all the punters out there who wagered correctly here.
If you’re a true fan token enthusiast like me you can track my World Cup portfolio on CoinMarketCap here.
🎙Catch the latest episodes of the 🇧🇷Brazil Crypto Report podcast
1️⃣ Axel Blikstad, co-founder of BLP Crypto - Brazil’s oldest crypto fund manager, talked about his experience escaping the FTX collapse. (Spotify)
2️⃣ Andre Franco, head of research at Mercado Bitcoin, joined to discuss the impacts of the FTX fallout on the Brazil crypto market. (Spotify)
3️⃣ If you need a refresher on the crypto regulatory framework in Brazil and what PL 4401 /2201 means for the industry, I highly recommend having a listen to my episode with Isac Costa from August. (Spotify)
🗞Brazil Crypto News Rundown
📈 Markets
Sam Bankman-Fried did not hide US$300 million (R$1.6 billion) with a Brazilian company, as was erroneously reported by the Daily Mail. While FTX filings show the funds were sent to a firm called Modulo Capital, and an entity with this registered name exists in Rio de Janeiro, a company of the same name exists in the Bahamas. Portal do Bitcoin spoke with the partner of the Rio-based Modulo Capital, who confirmed that the entity did not receive funds from FTX and only has only Brazilian shareholders.
Crypto.com became the first crypto exchange to become a licensed payments institution in Brazil.
The entity can now act as an electronic money issuer via a license from the Central Bank. With this license, an electronic money issuer can manage a prepaid payment account where funds are deposited in advance, but it cannot extend loans or allow accounts to maintain a negative balance
It can now offer regulated fiat wallet services in the country. Its Crypto.com Visa card has been available in the country since 2021.
In November 2022, Brazilian payments company CloudWalk became the first crypto company to obtain a payments license in Brazil. Other crypto exchanges including Mercado Bitcoin, Ripio and Bitso are reportedly in the pipeline to obtain this same license.
Crypto.com CEO Kris Marszalek said in a statement:
“Brazil and the entire Latin America market is a significant region in the pursuit of our vision of cryptocurrency in every wallet.” (CoinDesk) (InfoMoney) (BlockNews)
Bitcoin has been the worst performing asset for Brazilian investors in 2022, with accumulated losses of 67.64% through the end of November. By comparison, the IDIV, a B3 index fund, yielded 8.9% returns and the CDI (Interbank Deposit Certificate) - the reference for fixed income products in the market, yielded 5.7% after discounting for inflation. (CoinTelegraph Brasil)
Asset manager VanEck highlighted Brazil in its list of 2023 crypto predictions. It argued that that Brazil will be one of the most “crypto-friendly” countries in the world within the next year and predicted that it will tokenize a portion of its sovereign debt offerings via blockchain. Matthew Sigel, head of digital assets research at VanEck, wrote:
“Brazilian regulators have been aggressive in giving private companies a sandbox to play in this area. Itau Unibanco, the country’s largest bank, plans to launch an asset tokenization platform to transform traditional financial products into tokens and offer custody services for clients. Tokenization of sovereign debt may begin in Brazil first.”
The amount of ETH staked on Mercado Bitcoin has surpassed R$6 million (US$1.13 million) since launching a month ago. (CoinTelegraph Brasil)
Crypto asset management firm Hashdex released its investment outlook for 2023. In the report, the firm argues that bitcoin has strengthened as an investment asset despite its recent price struggles, that DeFi blue chip protocols will grow stronger and that that regulatory clarity will be in enhanced in the coming year.
BEE4, an exchange for trading tokenized shares of private companies, announced its second listed company. Healthy snack maker Mais Mu expects to launch its tokens in early 2023. (InfoMoney)
Brazilian investor Luiz Barsi, aka the “Brazilian Warren Buffett”, said in an interview that he “exorcises” cryptocurrencies and that he does not see a future for them. (Livecoins)
📱Adoption
Mercado Bitcoin won the 2022 Reclame Aqui award for the “cryptocurrency brokers” category, placing ahead of BitcoinTrade and Bitcoin to You in the voting (Portal do Bitcoin)
Banco Santander successfully conducted a test of an instant vehicle title transfer using the Digital Real and smart contracts. The bank, in partnership with infrastructure and custody firm Parfin, is one of the nine projects selected for the Central Bank’s LIFT Lab earlier this year. Alex Buelau, chief technology officer at Parfin, told InfoMoney:
“There are three smart contracts. One for digital real, one for DvP (delivery against payment) and one for turning the car into NFT.”
Brazil will be the first country to pilot a new Motorola smartphone called Dimo that features an integrated digital account. According to the company, Dimo will offer all the services of a complete checking account - users can pay bills and slips, transfer via Pix or TED, recharge cellphone credits. (Exame)
Todo Para o Mar, a non-profit that uses surfing as a tool for financial inclusion in Maracaípe, received support from a group of DAOs including NounsDAO, LilSisters and GnarsDAO. (CoinTelegraph Brasil)
Bloomberg Linea released its 100 Most Influential Latinos for 2022, and two individuals with ties to crypto made the list:
Gisele Bundchen, the ex-wife of Tom Brady who unfortunately invested in bankrupt crypto exchange FTX
Jose Fernandez de Ponte, a senior vice president at PayPayl who oversees blockchain, cryptocurrencies and digital money at the firm
Diego Aguiar, a controversial Brazilian trader affiliated with IQ Option, revealed that he was hacked for R$4 million (US$752 million) worth of GMX tokens through a string of 35 transfers. (Portal do Bitcoin)
Influencer Carlinhos Maia is launching a set of tokens that will give customers, fans and investors to become partners in Girabank, his digital bank. The tokens will be launched on the DIVI hub platform, a CVM approved investment app, and can be purchased for R$10 each - with a goal of raising R$10 million (US$1.9 million). (CoinTelegraph Brasil)
🎮 NFTs, Gaming and Metaverse
Brazil Agriland, a metaverse focused on Brazilian agribusiness, launched during the 2nd Planeta Campo Forum in São Paulo. It is a part of the Brasil Agribusiness communication and content hub through an initiative of DC Set Group, an entertainment conglomerate. Carla Tuccilio, CEO of Brasil Agribusiness, commented:
“The metaverse represents a new era for agribusiness by providing an immersive and truly differentiated experience to connect production to the consumer through technology, which is one of the objectives of Brasil Agribusiness. It is the innovation for an increasingly sustainable and integrated future.” (CoinTelegraph Brasil)
Blockchain gaming startup Bayz announced that co-founder Matt Rutledge will take over as CEO. (CoinTelegraph Brasil)
DRUID Creative Gaming is launching a new campaign to promote and execute blockchain games, metaverse activations and e-sports sponsorships for Mercado Bitcoin. For starters, Mercado Bitcoin is now the sponsor of e-sports club INTZ. (CoinTelegraph Brasil) (Portal do Bitcoin)
Tokenization startup BetaBlocks was selected by the Elos da Amazônia program to create a marketplace for tokenized carbon credits originating in the Brazilian Amazon. (Valor)
🏛 Public Policy, Regulation and Enforcement
President Jair Bolsonaro has until December 21 to sign or veto the cryptocurrency legislation passed by Congress last month. (CoinTelegraph Brasil)
Francisley Valdevino da Silva, aka the “Sheik of Bitcoins”, and other alleged Brazilian cryptocurrency scammers are the target of a money laundering investigation by the US Department of Justice. He faces up to 60 years in prison if convicted (Portal do Bitcoin)
Livecoins reports that Rodrigo Marques, owner of the Atlas Quantum bitcoin pyramid scheme, sought to purchase Rental Coins - the pyramid scheme operated by the Sheik.
Federal Police closed their investigation into the Sheik, indicting him for five crimes including forming a criminal organization, embezzlement and money laundering. Dubbed Operation Poyais, the PF determined that as much as R$1.15 billion (US$216 million) in damages were attributable to Rental Coins, a pyramid scheme that promised monthly returns of 13.5% on investments. The PF also determined that there was no attempt made by the Sheik to actually monetize the deposits:
“as soon as the amounts entered the criminal group’s accounts and cryptocurrency wallets, the accused immediately appropriated them, using a small percentage of the funds for payment victims and spending the rest according to their private interests.” (CoinTelegraph Brasil) (Portal do Bitcoin)
Federal Police undertook an operation called Scelerum Fructus against a gang accused of carrying out internet fraud. The gang allegedly used stolen money to buy real estate and ~R$800,000 worth of cryptocurrencies. (Portal do Bitcoin)
A group of injured GAS Consultoria investors demonstrated outside the US consulate in Rio de Janeiro on Thursday, December 15, demanding that Mirelis Zerpa, the wife of “Pharaoh of Bitcoin” Glaidson Acacio dos Santos, be extradited. Representatives of the group argue that extradition may be the last hope for creditors looking to recover their funds. (Portal do Bitcoin)
Glaidson will be transferred to a maximum security prison, according to a report by Fantástico. The move comes amid new indictment alleging that he hired gunmen to take out his competitors in Cabo Frio. (Livecoins)
A CoinTelegraph Brasil survey of Brazilian crypto companies found most to be optimistic about the country’s regulatory landscape for 2023
Brazilian footballer Neymar is caught up in an investor lawsuit against Bored Ape Yacht Club creator Yuga Labs and a collection of celebrities who allegedly promoted the tokens without disclosing financial incentives. (Valor)
🚀 Elsewhere in Latam
Paraguay’s Chamber of Deputies voted down a crypto regulation bill that would have boosted the country’s bitcoin mining industry.
Paraguay has an abundance of cheap hydroelectricity, priced as low as five cents per kilowatt hour.
The bill was passed by the Senate in July but was vetoed by President Mario Abdo Benitez. It was then sent back to the legislature for amendments and another vote
The revised text received just 36 votes - short of the 41 needed to pass.
The legislation would have capped how much the local power provider, Ande, can increase electricity rates for bitcoin miners to 15% .
Ande had originally proposed increasing the tariffs by 60%, claiming that mining activity overloads the existing grid and does not benefit the local society. (CoinDesk)
The defeat in Paraguay comes as a blow to the mining industry, which has been increasingly eyeing opportunities in Latin America as cheap electricity in other parts of the world dries up. This comes as miners around the world are facing tighter margins and liquidity crunches. (CoinDesk)
