🇧🇷BCR #72: Bolsonaro Signs Brazil Crypto Regulation into Law
🇧🇷BCR #72: Bolsonaro Signs Brazil Crypto Regulation into Law
Plus: Binance hires new Brazil operations chief; CVM relaxes rules on Brazilian crypto funds
Ola pessoal!
Merry Christmas, Happy Holidays and welcome to 🇧🇷Brazil Crypto Report for the week of December 19-23, 2022.
This was a historic week for the Brazilian crypto world as legislation, seven years in the works, was signed into law by President Jair Bolsonaro on Wednesday, December 21.
Have a great week everyone and thanks for reading!
-AWS
Crypto Bill is Now Law of the Land
Readers of 🇧🇷Brazil Crypto Report will know that the battle for legislation to create a regulatory framework for cryptocurrency businesses in Brazil was the predominant storyline for 2022. So the formal sanctioning of the final bill into law on December 21 was an extremely important ending to the year.
Beyond that, it’s one that’s been in the works for the last seven years as persistent lawmakers like Aureo Ribeiro and industry stakeholders have relentlessly pushed for clarity around the matter. The long journey of the bill veered from being a total ban on cryptocurrencies to a fight between well-funded crypto exchanges over provisions such as registration and asset segregation.
It was a sweet ending for those that worked hard to get this legislation enacted. The law creates a legal definition for crypto assets - enshrining them as the digital representation of an asset that can be traded, transferred and used for payments or investments. It also makes embezzlement and other financial crimes involving cryptocurrencies a unique crime and establishes a licensing regime for crypto companies and trading outfits. Cryptos that meet the definition of a security will be regulated by the CVM - Brazil’s securities regulator, while the Central Bank will likely be appointed to regulate the market more broadly.
Crypto brokers in Brazil will now have 180 days to bring themselves into compliance with the new law.
Eduardo Neger, president of Abranet - Brazil’s internet association, reacted:
“The Cryptocurrency Law is a milestone for the Brazilian financial sector and places Brazil in a select group of countries that have specific legislation to regulate cryptocurrencies. With the entry into force of the law, we expect the regulator to act actively in the preparation of more detailed guidelines on the subject.”
Crypto exchanges including Binance - one of the main lobbying forces involved in the battle over the last year, expressed support for the bill’s passage. It said in a statement:
“Binance believes that regulation is the only way for the crypto and blockchain industry to develop and reach the general public, for society to enjoy the benefits that this technology offers. A regulated environment can support innovation and is critical to establishing industry confidence and long-term growth.”
Those efforts have paid off, and with the law’s passage Brazil can legitimately claim to be a world leader in the area of cryptocurrency regulation. Rodrigo Caldas de Carvalho Borges of Carvalho Borges Araújo Advogados told InfoMoney:
“Brazil is in a prominent position vis-à-vis the major economies of the world in relation to the regulation of the sector….With specific rules and the recognition of this industry, the expectation is that the country can attract new investors and entrepreneurs in the sector”
Karen Duque, head of public policy at Bitso Brasil, commented:
“We celebrate the publication of Law 14,478 that regulates companies providing virtual asset services, in order to increase the protection of users, companies and crypto investors in the country”, she says.
Emilia Malgueiro Campos, partner at MCZ Advocacia, emphasized that the law is not nearly as good as it could have been and now neglected several critical components such as asset segregation. She told CoinTelegraph Brasil:
"What we have left now is to hope for the Central Bank to "correct" these oversights in the regulation process, using the guidelines of international organizations, which are much more advanced on the subject than Brazil. But this must be done in conjunction with the market, or it will be doomed to failure."
CoinTelegraph Brasil gathered some further reaction from 12 experts about the law’s implications.
However, as we’ve emphasized here repeatedly, the devil is always in the details when it comes to public policy matters. This is even more so when it comes to a polemic topic like cryptocurrencies. In the United States, we’re learning the hard way that there will be always be lawmakers like Elizabeth Warren and bureaucrats like Gary Gensler eager to use regulation as a Trojan Horse to crush all of the aspects that make crypto interesting in the first place, if not to destroy the industry altogether.
Proper public policy is all about finding this right balance of promoting innovation and economic development versus throttling crime and protecting consumers.
🗝 Bottom line: if the Banco Central, which is expected to be the named as the regulator of the industry, and the CVM are able to create light touch frameworks that promote the technology without stifling the very aspects that make it interesting and valuable, then this legislation will have been a success. If they fail to do that and crypto in Brazil turns into a Frankenstein that gets hijacked by incumbent power structures, then it will have a failure.
Binance Hires Nephew of Incoming Finance Minister to Lead Brazil Operations
Binance announced on December 23 the hiring of Guilherme Haddad Nazar as general director for its Brazil operations, filling a post that had been vacant since July 2021 when Ricardo da Ros abruptly resigned after six months in the role.
Nazar is the nephew of Fernando Haddad, who was formerly the mayor of São Paulo and will serve as finance minister in the new Lula administration.
He said in a statement:
“Brazil is one of the top ten markets for Binance, and building dedicated teams allows us to provide more and better personalized services for our local users. We will continue to invest and contribute to the development of the blockchain and crypto ecosystem in the country.”
Previously, Nazar was a vice president of real estate technology company Loft and was Uber’s head of operations in Brazil until February 2020.
😎 Trending Coins in Brazil
The top coins this week include Baby Doge Coin, bitcoin and BNB, per crypto data site CoinGecko.
CVM greenlights the door for funds to invest in crypto assets
The CVM, Brazil’s securities regulator, released new guidance on December 23 allowing Brazilian investment funds to invest in crypto assets. Crypto assets can be included in a fund “provided they are traded in entities authorized by the Central Bank of Brazil or the CVM, or, in the case of operations abroad, by a local supervisor”, the CVM stated.
CVM head João Pedro Nascimento commented on his Linkedin profile:
“The new rule for Investment Funds portrays the relevance of a solid and functional regulatory environment for this very important industry in the Brazilian capital market”
Alexandre Ludolf of QR Asset explained to Valor that this will allow Brazilian funds to use domestically-based service providers, regulated by the CVM or Central Bank, to acquire crypto assets instead of having to go through overseas brokers. He said:
“Now, the CVM brings clarity that there is the possibility of purchasing assets directly.”
Specifically, the agency highlighted that it will closely monitor “unregistered offers of security tokens” as well as “digital influencers” and “governance in ESG/ASG actions in the securities market”.
🏆World Cup Fan Token Watch 📈
Congratulations to all the Argentina and Messi fans out there on the exciting victory! I was frankly surprised to see so many Brazilians pulling for Argentina in the championship; it was neat to see the South American solidarity at play.
Unfortunately, the victory was a “sell the news” event as far as Argentina’s ARG fan token was concerned. The coin sold off immediately as the match was ending and continued to free fall. As of press time it is down XX% over the last seven days.
Nevertheless, the World Cup fan token experiment was a fun one to play around with. The jury is still out on whether this will become a mainstream hook to onboard more people into crypto but I reckon it has the potential to do so.
If you’re a true fan token enthusiast like me you can track my World Cup portfolio on CoinMarketCap here. Exame also ran an end-of-year overview of how fan tokens issued by Brazilian clubs, including Flamengo, Corinthians, São Paulo FC, have fared over the last 12 months.
🎙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
Nubank added two new cryptocurrencies, MATIC and UNI, to its platform. It previously offered just bitcoin and ethereum. The digital bank claims that more than 2 million users have purchased crypto on its platform since launching in June. Nubank explained in a note:
“The customer has access to articles that explain volatility, crypto use cases and even explanations about some of the main cryptocurrencies, including the newly available Polygon and Uniswap.” (Portal do Bitcoin)
Bitso has more than 1,500 institutional clients in the Latam region, many of which are seeking exposure to US dollars via USDC stablecoins. Thales Araújo de Freitas, head of Bitso Brazil, told The Block:
“They want to have some exposure to dollars but instead of going to a bank and hedging with FX forwards, they buy stablecoins…Even with the winter, we keep seeing more interest from companies.”
Mercado Bitcoin launched its MBFP15 token, its fifteenth digital fixed income token backed by financial flows. It has an estimated return of 16% per year. (Crypto Times) (Portal do Bitcoin)
Banco Santander emphasized that while it offers access to cryptocurrencies through ETFs to its clients - and even plans to expand those offerings, it does not necessarily recommend them to clients. (CoinTelegraph Brasil)
Brazilian DeFi protocol Pods Finance raised US$5.6 million in a funding round, with an eye for developing structured crypto products for institutional and retail investors. Investors Republic, IOSG, Tomahawk and Framework Ventures and others were included in the round. Rafaella Baraldo, co-founder and CEO, told CoinTelegraph Brasil:
"Always the first step in terms of adoption is for people to acquire cryptocurrencies, have access to cryptocurrencies, and the second step is to invest the cryptocurrencies that they own. And Pods offers the entire infrastructure of strategies with a single purpose of low risk and Interesting returns for investors through DeFi." (Exame) (BlockNews)
Mynt, the crypto platform built by BTG Pactual, enabled two new crypto assets for trading - MANA and SAND. (Exame) (Valor Investe)
📱Adoption
Beenx, the Brasil Energy Exchange, a blockchain-based over-the-counter electricity market went into operation on December 21. The platform is a partnership between three of Latin America’s largest energy companies - AES Brasil, ArcelorMittal and Eneva. It uses R3’s Corda DLT to allow for digital trading of electricity, clean energy certificates and other financial services. (CoinTelegraph Brasil) (BlockNews)
Zero55 is plodding ahead with a real estate token marketplace in Brazil. Its first tokenized property is a development in Sorocaba by the company MLB. (Crypto Times)
Valor highlighted how Rio de Janeiro is becoming the center of Brazil’s crypto scene. The city’s Zona Sul, in particular Leblon, as well as Porto Maravalley are attracting a wide variety of entrepreneurs and venture capitalists involved in the crypto economy.
A “tokenized Pix” project developed by Mobiup won a government-hosted Web3 hackathon run in partnership with Celo. The hackathon drew more than 500 participants who presented 27 projects during the event. Camila Rioja, head of Latin America at Celo Foundation, commented:
“There were several sectors that sat down together and dedicated themselves to more than 40 hours of workshops, in about 15 days. The Union's equity today is R$ 2 trillion. So the education angle on the heritage of the union and opening up potential regenerative avenues in crypto in regards to that is super important.” (CoinTelegraph Brasil) (Exame)
Liqi’s Daniel Coqueiri argues that greater mainstream understanding of NFTs and digital collectibles, more companies exploring tokenization (including fan tokens) and Brazil’s SEC offering a guidance opinion on the treatment of crypto assets were strong points to an otherwise rough 2022 for the Brazil crypto world. (Portal do Bitcoin)
2022 was a “stress test” for the Brazilian fintech and crypto ecosystem due to the global macro climate and increasing interest rates and inflation domestically, which has throttled fundraising efforts and stifled valuations, argues Bruno Diniz. (Exame)
Brazilian footballer Dani Alves is a new partner in Light DeFi, a Binance Smart Chain project whose has devalued 97% since launching in November 2021. (Livecoins)
Argentine startup AgroToken is testing a new tokenized commodity product in Brazil. The idea is that a producer can use a cellphone to create a digital representation of the physical product and use those tokens in transactions and as collateral for obtaining loans. Later on in the roadmap is a debit card that can be filled with these tokens, allowing for payments via tokenized grains, and to create a secondary market for them. Anderson Nacaxe told InfoMoney:
“Agrotoken was born to bring benefits to rural producers. We do not create digital assets for speculation. It is a digital asset that aims to connect agents in the chain – and at the end of it there is an individual, who is buying this asset as food or investment. If he wants to buy as an investment, in reality, he is buying soy (or another commodity) from a rural producer.”
Brazilian users of Uniswap will now be able to make purchases via credit card, debit card and bank transfer via payment processor MoonPay. (CriptoFacil)
MoneyGram announced the launch of its new MoneyGram Online service in Brazil. The service will be enabled via a partnership with Frente Corretora, which is one of Ripple’s partners in Brazil. (CoinTimes)
Law firm Fc²mlaw has developed a tool called Radarweb3 to track the development of Brazil’s Web3 ecosystem. (Exame)
Bitfy, a Brazilian startup that provides B2B blockchain infrastructure, was selected by a new Visa startup incubation program. (CoinTelegraph Brasil)
Inflation, asset tokenization and payments were the driving forces behind crypto adoption in Latin America in 2022, argues CoinTelegraph Brasil.
🎮 NFTs, Gaming and Metaverse
Metaverse platform Upland announced that Buenos Aires will be the next city to be represented digitally in its metaverse, after Rio de Janeiro. (CoinTelegraph Brasil)
Upland also announced a partnership with UNICEF Brasil to provide Web3 education, training and education to young people. (CoinTelegraph Brasil)
TTK Movement and the Rio Crypto Hub are auctioning off a collection of NFTs to raise funds for the Tavares Bastos community in Rio de Janeiro. The NFTs are of drawings made by children who have benefitted from the project. (CoinTelegraph Brasil)
Nathalie Arcuri, host of the Me Poupe YouTube channel, distributed 15,000 NFTs during a livestream. The NFTs were issued to individuals who have completed a training program and represent a fraction of a property in Rio Grande do Sul. (Portal do Bitcoin)
A fan paid R$30,000 for an NFT representing a jersey, part of the Rough Diamonds collection worn by Palmeiras footballer Endrick. (CoinTelegraph Brasil)
🏛 Public Policy, Regulation and Enforcement
Tarcísio de Freitas, the governor-elect of São Paulo, had his Twitter account hacked and taken over by attackers promoting a cryptocurrency scam. (Portal do Bitcoin)
“Pharoah of Bitcoins” Glaidson Acácio dos Santos will go to a popular jury in Rio de Janeiro on charges on aggravated homicide. Glaidson is accused of ordering the murder of two individuals - Wesley Pessano Santarem and Adeilson José da Costa - who were competitors of GAS Consultoria. (Portal do Bitcoin)
Glaidson was ordered to be transferred to a new prison in Paraná after an investigation found that he was a corrupting influence inside the Bangu 1 prison in Rio de Janeiro. The judge stated in the ruling:
“It is indisputable that the presence of the accused causes great vulnerability not only to the prison system but also to public order, especially since a good part of his assassins are on the run, however, visiting him.” (Portal do Bitcoin)
Brazil’s CVM ordered Gensa Serviços Digitais and its parter Gabriel Tomaz Barbosa to pay a fine of ~R$2 million for operating a cryptocurrency pyramid scheme promising 15 percent returns and then disappearing with customers funds in 2020. (Portal do Bitcoin)
BDM Digital, a cryptocurrency issuer from Campo Grande, is being sued by a blockchain developer claiming to be the true creator of the project. (Portal do Bitcoin)
A R$37 million jet belonging to Brazilian singer Wesley Safadão was seized by police pursuant to a decision by a Paraná court. The aircraft is at the center of a dispute involving of clients of “Bitcoin Sheik” Francisley Valdevino da Silva who are seeking to be made whole. (CriptoFacil)
Braiscompany, accused of operating a pyramid scheme, has delayed payments to customers - prompting a social media backlash. The company promises returns of up to 80% per year by leasing cryptoassets. (Portal do Bitcoin)