🇧🇷BCR #76: Brazil-Argentina Common Currency Proposal Takes Shape, Draws Controversy
🇧🇷BCR #76: Brazil-Argentina Common Currency Proposal Takes Shape, Draws Controversy
Plus: Parfin raises US$15 million in latest round; lost year for crypto regs in Brazil?
Ola pessoal!
Welcome to 🇧🇷Brazil Crypto Report for the weeks of January 23-27, 2023. I snuck away for a few hours this weekend to check out the Flamengo vs Palmeiras match in Brasilia for the Brasil Supercopa.
It was a super fun experience overall - though I naively thought that simply purchasing a ticket would guarantee me a seat. I quickly realized that’s not how it works in Latin America as there were two times as many people in my section as there were actual seats. In the end it didn’t matter if we had seats or not because everyone stood for the entire game anyways.
As always, I appreciate you reading and I hope you have a great week.
-AWS
Brazil-Argentine common currency takes shape
The conversation over a potential South American currency continued to rage on Twitter this week after Lula and Argentine president Alberto Fernandez shared their intentions to push the project - called the “Sur”. Ideally, the shared currency would increase trade between the two countries while reducing dependence on the dollar.
The text signed by both heads of state following their first bilateral meeting states reads:
“We also decided to advance discussions on a common South American currency that can be used for both financial and commercial flows, reducing operational costs and our external vulnerability,”
Finance Minister Fernando Haddad articulated that Brazil would have two official currencies in this scenario - the Real and the CBDC shared by the two nations. Haddad explained that he has been discussing the topic with his counterpart, Sergio Massa - Argentina’s Minister of Economy, but there are no further details on how it would work.
The project has its share of naysayers. Brazilian Central Bank President Roberto Campos Neto stated that he is against the idea, stating during a webinar:
"I am against. I don't think it makes sense for us right now for a variety of reasons.”
João Zecchin, founding partner at Fuse Capital, argued that single currencies shared by countries with different monetary policies has proven to be problematic, but suggested that a blockchain-based synthetic currency used as an intermediary between the two countries could be feasible. He told Exame:
"It is a solution to have a middle way, without committing the two central banks to identical monetary policies but still facilitating the exchange rate. It could even use the infrastructure of Real Digital and a future Peso Digital and create an exchange rate with settlements blockchain, also avoiding SWIFT."
Coinbase CEO Brian Armstrong even chimed into the discussion by suggesting that the countries should consider adopting bitcoin as their single currency, similar to El Salvador.
2023 could be a lost year for crypto regulation amid transitions and political turmoil
Paulo Alves of InfoMoney wrote an important article highlighting how momentum behind crypto regulation could slow down significantly this year as political turmoil in Brasilia, transitional bureaucracy and other competing priorities may force it to take a back seat.
While the enabling legislation was signed into law in late December and has a deadline of 180 days to enter into effect, specific rules have yet to be defined nor has a formal regulatory body (expected to be the Central Bank) been designated by the Executive Branch. Further, there is nothing preventing this 180 day deadline from being extended.
This means that work on developing a consultation and rulemaking process for crypto exchange licenses may not begin for some time, rendering it unlikely that any such licenses will be issued this year.
Others interviewed for the piece expressed concern that the new Lula government may opt not to designate the Central Bank as the industry regulator. Attorney Rodrigo Caldas de Carvalho Borges argued that such an outcome would render the law toothless. He told InfoMoney:
“Not defining [the BC] would empty the law…The benefit of appointing a technical body makes the process more dynamic than the legislative one, and this would be lost. The market would remain in a gray area and the law would have little effect”.
Parfin raises US$15 million in latest round
The crypto service provider for institutions raised from Framework Ventures, Valor Capital Group, Alexia Ventures and L4 Venture Builder - an investment fund formed by the B3 Exchange.
Parfin provides a variety of Web3 infrastructure solutions including MPC custody, an API that allows institutions to offer crypto to end users, treasury management, an OTC desk and a “blockchain as a service” platform called Cryptum. The funds will be used to launch new products like Parchain, a permissioned EVM fork that enables DeFi and asset tokenization.
Jochen Mielke de Lima, CEO of B3 Digital Assets, commented:
“Parfin is an excellent partner with a solid team and technology stack…With this step and a new capital increase, we hope to further strengthen our relationship and we hope that Parfin will continue to execute its roadmap to offer digital infrastructure at an institutional level, reconciling market experience and technological innovation”
Parfin’s Cryptum product currently has approximately 300 clients in Brazil, according to CEO and founder Andre Salem.
🗞Brazil Crypto News Rundown
📈 Markets
Inflows into crypto asset investment funds in Brazil dropped dramatically in 2022 from the previous year, according to a survey by asset manager Hashdex. New money coming into the sector fell from R$3.5 billion (US$689 million) in 2021 to R$440 million (US$87 million) in 2022.
Performance of Brazilian crypto funds lagged as well: KPTL’s A5 Bohr Arbitrage Fund was down 15.8 percent, Vitreo/Empiricus’s Vitreo NFT fund lost 86%, while Hashdex’s HASH11 ETF, the largest crypto index fund, was down 69 percent for the year.
Titanium Structure, managed by Titanium Asset, was one of the few that appreciated. It posted a 6.2 percent gain on the year with its quantitative arbitrage strategy. (Valor)
Valor also published a good piece looking at the state-of-play for Brazil’s 13 crypto ETFs currently trading on the B3 exchange.
Brazilians declared over R$100 million worth of stablecoin declarations in 2022, a 135 percent increase over the previous year, according to preliminary data from the Receita Federal that does not factor in December numbers. (InfoMoney)
Blockchain analytics firm Chainalysis predicts stablecoin usage in Brazil and Latin America to increase in 2023
Bradesco, the last of Brazil’s big banks to dive into crypto, is preparing ambitious plans for tokenizing debt securities, managing crypto asset funds and offering crypto trading services to clients. André Bernardino, director of shares and custody at Bradesco, told Valor:
“This market has already arrived and is here to stay. Opening for cryptocurrency trading is something that is within our plans. The CVM has authorized funds to invest in crypto, and Bradesco is one of the largest fund managers in Brazil.” (Portal do Bitcoin) (CoinDesk)
Despite crypto’s poor performance in 2022, four of the 10 most popular ETFs listed on the B3 exchange are crypto-focused, according to s survey by TC Economatica.
The HASH11 ETF, managed by Hashdex, was the second most popular ETF on the exchange, with nearly 150,000 shareholders.
In total, 13 ETFs with cryptocurrency exposure currently trade on the B3, with eight of them launched in 2022. (CoinTelegraph Brasil)
Bitso became the first exchange in Latin America to offer EUROC, Circle’s Euro-pegged stablecoin. The exchange also noted that its stablecoin transaction volume grew 95% in 2022. (BlockNews) (Valor)
Ripio, the Argentine crypto exchange that operates in Brazil, is one of the 50 largest creditors of Genesis Trading. Genesis, which filed for bankruptcy protection earlier this month, owes US$27.5 million to Ripio with regards to a loan. Ripio told InfoMoney that “ ser funds have not been compromised in any way by this situation”.
São Paulo-based Schnutz Investments LP is the 50th largest creditor, per BlockNews
iVi Technologies, headquartered in Belo Horizonte, is prepping a new quantitative crypto asset ETF to launch on the B3 exchange in the second quarter of 2023, contingent upon approval by the CVM. The fund, developed in partnership with MIAX - the Miami exchange, will mirror a new index scheduled to be released in March. (InfoMoney) (Exame)
Coinext, the Brazilian crypto exchange, will launch a crypto asset management division to manage an offshore ETF.
The unit will function separately from the exchange side of the business and will be regulated by the CVM and the Banco Central. It is expected to launch in the first half of 2023 once it receives the necessary approvals.
The fund seeks to raise between R$5 - R$25 million from institutional and accredited Brazilian investors. (Portal do Bitcoin) (Valor)
WEB3DEV, the Brazilian Web3 educational platform, opened its first round with the goal of raising R$7.5 million (US$1.5 million) to expand its community across Latin America. R$2.5 million has already been secured from MZ Web3 Fund. (CoinTelegraph Brasil)
The blow up of Brazilian retailer Lojas Americanas, which discovered a US$4 billion gap on its balance sheet, could have been avoided with the tokenization of credit markets in Brazil, argued Paulo Oliveira, CEO of Bolsa OTC Brasil. (Crypto Times)
Brazilian fintechs received R$9 billion (US$1.8 billion) in investment funding in 2022, according to a survey by the District. (Exame)
More than 50 percent of Brazilians under 35 currently use “neobanks” such as Nubank, according to a survey by Mambu - a fintech. (Exame)
Brazilian startup Estar is seeking to create the first secondary market for trading tokenized startup shares in Brazil within the CVM’s regulatory sandbox. The idea is that Estar allows startups to do conduct a “mini-IPO” in which shares are tokenized, divided and then listed in the marketplace. (Exame)
Mynt, BTG Pactual’s crypto platform, listed four new assets for trading on its platform - Aave, Uniswap, Lido and Curve, bringing its grand total to 14. Also introduced was a new tool for calculating income tax obligations on crypto investments. (CriptoFacil) (Crypto Times)
Mercado Bitcoin offered its first tokenized receivables product in Europe via CriptoLoja, a Portuguese exchange in which MB has an ownership stake. While the tokens are distributed in the European market, they are backed by tokenized assets in Brazil - specifically, PagCartão receivables. The offering sold out in less than 24 hours. (CoinTelegraph Brasil)
Brazil is one of Binance’s top 10 institutional markets globally, and institutional clients in the market increased by 15.5 percent in Q4 2022 according to Guilherme Nazar, Binance’s new director general for Brazil. (Livecoins)
📱Adoption
Mercado Bitcoin opened registrations for its “Tokenize Your Idea” accelerator program. (BlockNews)
Mercado Pago rolled out a new customer referral scheme for its crypto platform. Users will earn 10 BRL for each referral. (Portal do Bitcoin)
Visa and Agrotoken launched a credit credit card backed by tokenized agricultural commodities. It aims to allow producers to tokenize commodities and then use these as payment for goods and services. Anderson Nacaxe, national director for Agrotoken in Brazil, commented:
"The international credit card can be used as a means of payment in more than 80 million Visa-accredited establishments around the world. It is possible to buy from a simple coffee to agricultural inputs, fuel for the truck or a trip abroad." (CoinTelegraph Brasil)
Several Brazilian bitcoin miners have joined an industry group in Paraguay seeking to introduce new legislation that would regulate crypto mining and trading in the country. A similar bill passed Paraguay’s Chamber of Deputies last year but was vetoed by President Mario Abdo Benitez. (CriptoFacil)
Two Web3-themed floats will be on display at Carnaval in Salvador next month. The initiative is being led by Musigreen - founded by Mariana Brandão and Ana Clara Cady, in partnership with DLT Hub, MADDY Entertainment, James Bowater of Crypto AM and Jade City. (CoinTelegraph Brasil)
CNN Brasil personality Gabriela Prioli posted to Instagram a recommendation to buy stablecoins to protect against inflation. Prioli also became an ambassador for the crypto exchange Bitso last March. (Portal do Bitcoin)
Vinteum, the non-profit research center, will help finance Brazilian students who wish to be introduced to Bitcoin open source software development. (Portal do Bitcoin)
Fenasbac opened registrations for its second cohort of its Next fintech accelerator. In particular, it is seeking stablecoin projects and blockchain payment solutions for the Digital Real. (CoinTelegraph Brasil) (BlockNews) (Exame)
USP professor and bitcoin hater Jorge Stofli urged the US Senate Finance Committee on Twitter to be skeptical of the claims made by “bitcoin mining lobbyists”
Brazilian startup Green Mining, supported by Ambev, was selected to present at the World Economic Forum in Davos. The platform tracks product packaging and recycling through the production cycle using blockchain tech. (CoinTelegraph Brasil)
Me Poupe!, the company owned by financial educator and YouTuber Nathalie Arcuri, laid off nearly half of its workforce - roughly 60 out of 122 employees - on Friday night. the layoffs come after the firm aggressively hired 90 employees in 2022. (Portal do Bitcoin)
Fluminense fan tokens sold out in initial release to the public. (CoinTelegraph Brasil)
Visa announced the hiring of Adriana Umeda as executive director of risk for Brazil. She will be responsible for managing relationships with Visa partners, including crypto companies, in the country. (CoinTelegraph Brasil)
Viden Ventures announced its first fund aimed at Web3 companies. The firm, which started in 2021 focusing on gaming-related crypto assets, intends to invest in up to 20 early stage companies, with contributions ranging from R$500,000 to R$2.5 million. (CoinTelegraph Brasil) (Crypto Times)
Julien Dutra, head of government relations at Mercado Bitcoin, predicts that 2023 will be a big year for bitcoin in Brazil - despite the bear market - because of the regulatory clarity afforded by legislation signed into law in December. (CoinTelegraph Brasil)
Rispar, the Brazilian fintech that offers credit secured by cryptocurrencies, is expanding the number of cryptos available for usage as collateral. The first expansion will include Ethereum, Polkadot, Chiliz and Pax Gold. Rafael Izidoro, CEO, explained:
“This new product is born with multiple cryptos, what we call a basket of guarantees. We are going to start with six assets, but we are going to expand weekly.” (InfoMoney)
Tokenization firm BlockBR announced the hiring of Fernando Masuela as CFO. The executive has 23 years of experience in traditional finance at HSBC, Santander, Itaú and more. (CoinTelegraph Brasil)
The Bank of International Settlements is exploring a new system that would create an “international Pix” that would connect Brazil’s system with those of ~60 other countries. (Exame)
Brazilian DeFi project Pods Finance undertook four security audits with three separate companies. The effort located and fixed a critical flaw and several lower risk incidents. (CoinTelegraph Brasil) (BlockNews)
Banco Central President Roberto Campos Neto declared that the underlying Pix code is now available to other countries interested in copying the payment system. (Livecoins)
Mercado Bitcoin launched the first “learn to earn” project in Latin America in conjunction with Nodle. (Portal do Bitcoin)
Saamsung users in Brazil and seven other countries will soon be able to use the Samsung digital wallet for storing cryptocurrencies. (CriptoFacil)
Educar+ and Polygon are teaming up to launch the first Polygon TechHouse in Rio de Janeiro. The initiative will bring Web3 education to young people in the Complexo do Chapadão community. (CoinTelegraph Brasil) (Exame)
🎮 NFTs, Gaming and Metaverse
BAYZ, the Brazilian Web3 gaming and NFT company, laid off 80% of its employees, Portal do Bitcoin reports. The cuts bring the company’s total headcount down from 85 to just 10-15. Co-founder João Borges posted on the company’s internal Slack:
“We were working on an investment round that was paused for now. Due to the market situation, which has harmed our customers, and with the contribution not being made to date, unfortunately, we will have to adapt several departments of the company so that we can honor the services provided so far.”
DUX, the Web3 gaming studio, was selected for the beta startup program for Web Summit Rio, to be held in May. (CoinTelegraph Brasil)
A group of Brazilian developers created Verifygram, a tool that uses blockchain and NFTs to offer verification and authentication for social media profiles. (CoinTelegraph Brasil)
CryptoRastas, the Brazilian NFT collection, is creating a music label utilizing NFTs to distribute songs. (CoinTelegraph Brasil)
The Brazil Metaverse Fashion and Beauty District will launch in the Decentraland metaverse in March, during Metaverse Fashion Week. The space is being developed by Gira Studio, which is focused on the convergence of Web3 and fashion, architecture and art. (CoinTelegraph Brasil)
IOXtream, a Brazilian company, aims to bring Web3 to the streaming world by allowing Twitch streamers to interact with viewers via cryptocurrencies. (CoinTelegraph Brasil)
São Paulo will soon have a digital version in the Upland metaverse, joining Rio de Janeiro and Buenos Aires. (Exame) (CoinTelegraph Brasil)
Tero Labs, the company behind the Rough Diamonds NFT collection, launched its Tero Store platform that will support the careers of young Brazilian footballers with NFTs.
“By holding [keeping] an athlete's NFT, you earn tokens and these tokens can be exchanged exclusively for experiences and/or memories within the platform. The more people have and maintain the NFTs, the more experiences are added, and the more value is generated for all project holders.” (CoinTelegraph Brasil)
Banco24Horas, Brazil’s largest ATM network, announced the opening of its first space in the metaverse. (CoinTelegraph Brasil)
Zebedee, the bitcoin Lightning Network focused payments company, announced the launch of two new play to earn games: Bitcoin Chess and Bitcoin Scratch. The Brazilian-founded company also integrated with “listen to earn” podcast platform Fountain to give users the ability to earn bitcoin while listening to podcasts. (Portal do Bitcoin)
🏛 Public Policy, Regulation and Enforcement
The Public Ministry of Rio de Janeiro is investigating Binance over alleged losses incurred by customers due to account and balance blockages. (Portal do Bitcoin)
Representatives from Chainalysis met with Otavio Ribeiro Damaso, director of regulation at the Brazilian Central Bank, on Thursday, January 26, Portal do Bitcoin reports. The Chainalysis representatives were Brianna Kernan, Latam lead, and Thomas Stanley (no relation), regional director and revenue officer.
BlueBenx, a Brazilian crypto exchange which froze customer withdrawals in August of last year and basically disappeared while owing R$160 million, said that it would send 5,000 units of SHIB to its clients as part of its rewards program. (Portal do Bitcoin)
“Pharaoh of Bitcoins” Glaidson Acácio dos Santos was transferred from the Bangu 1 prison in Rio de Janeiro to Penitenciária Federal de Catanduvas in Parana. The transfer was requested by authorities who claimed Glaidson was still leading his criminal organization from behind bars. (Portal do Bitcoin)
Alexandre de Moraes of the Supremo Tribunal Federal denied a sentence reduction request for Fernando Ewerton Cesar da Silva, who was convicted for involvement in the Kriptacoin pyramid scheme - which netted the scammers the R$250 million (US$49 million). (Portal do Bitcoin)
The Superior Tribunal de Justiça denied a habeas corpus request made by “Sheik of Bitcoins” Francisley Valdevino da Silva. (Portal do Bitcoin)
Braiscompany owner Antonio Neto Ais continued to brush off criticisms leveled by angry customers over nonpayment allegations, asserting that he himself is “the guarantee” and that those who criticize him are “evil people who can only have a pact with Satan”. He stated in a live chat that he will no longer tolerate customers complaining about the situation and that he is “working every day” to fix the situation.
The firm also released a statement identifying several reasons why it has missed investor payouts the past three months, including the development of a new app and repeatedly blaming Binance for blocking withdrawals. He ruled out filing a lawsuit against the exchange, however.
At least two lawsuits were filed against the company in Paraiba by investors seeking their funds returned
A former client of the firm created the Braiscompany Victims Association to support injured investors
The situation is becoming the subject of comedy, with humorist Lucas Veloso posting a parody of himself as Antonio Neto Ais to his 1.3 million followers on Instagram.
Portal do Bitcoin ran a deep dive on Neto Ais, who has photos of himself with footballers such as Messi, Ronaldinho Gaucho, Romario, Neymar and others on his Instagram account.
Federal Deputy Julian Lemos of Paraiba published an Instagram post in support of Neto Ais and Braiscompany. (Portal do Bitcoin)
Portal do Bitcoin reports that Neto Ais was involved in three previous ventures that also defaulted on clients.
The Public Ministry of Rio de Janeiro launched a civil inquiry investigating the difficulties experienced by Binance customers looking to withdraw funds. (Livecoins)
Otavio Ribeiro Damaso, a director at the Brazilian Central Bank overseeing cryptocurrency and digital asset matters, met virtually with Daniel Coquieri of Liqi Digital Assets on January 19 regarding asset tokenization. (Portal do Bitcoin)