🇧🇷BCR #78: What Lula's Feud with Central Bank Means for Crypto
Also: Brazil crypto volumes shrink 24% in 2022; Nubank gets green light for Nucoin
Huge welcome to 🇧🇷Brazil Crypto Report for the weeks of February 6-10, 2023. I hope everyone is doing well.
I’m excited to announce that the BCR YouTube channel is officially live, as is Season 2 of the podcast. In the inaugural edition, I talk to Karen Duque, head of public policy at Bitso, and Julien Dutra, head of government relations at 2TM Group and Mercado Bitcoin. Karen and Julien were two of the catalysts that helped passed crypto legislation last December.
Please have a watch or listen (can also listen on Spotify) and feel free to subscribe/like/comment if you enjoy the content!
As always, I appreciate you reading and I hope you have a great week.
Central Bank autonomy on the line as Lula lashes out at Campos Neto
Lula, Brazil’s new president, lashed out at the Brazilian Central Bank and its president Roberto Campos Neto this week in an attack on the institution’s autonomy. He argued that the bank’s 3.25 percent inflation target is too low:
“Is this country doing well? Is this country growing? Are people’s lives improving? No. So, I want to know what independence was good for….There is no reason for the interest rate to be at 13.75 per cent. Does Campos Neto want to achieve European inflation standards? We have to reach a Brazilian standard. An inflation rate of 4.5 per cent in Brazil, of 4 per cent, is a good thing if the economy is growing,”
Former president Jair Bolsonaro granted the institution official autonomy in 2021. Lula intends to review and possibly reverse this decision - re-positioning the bank as a political actor. According to the Financial Times:
Many fear that Lula’s administration is resembling that of former leftwing president Dilma Rousseff, who pressed the bank to adapt monetary policy to suit her political agenda and whose mismanagement of the economy was widely seen as a factor behind Brazil’s deepest ever recession between 2014 and 2016.
The comments sent jitters throughout the market as investors moved to reset inflation expectations.
What does any of this have to do with crypto?
First, Campos Neto and his team of technocrats at the Banco Central are supposed to be appointed as the official regulator of the crypto industry, pursuant to enabling legislation passed last December. Given the state of the relationship between the new president and the BC, it’s looking more unclear as to when this formal designation will actually happen
Second, Campos Neto’s team is the driving force behind the development of the Digital Real (not to mention other successful initiatives like Pix and Open Finance), which is currently being tested and expects to be rolled out fully next year.
In somewhat related news, the Lula administration is now picking a fight with Uber, the rideshare company, arguing that Uber drivers should be included in Brazil’s national social security system - effectively rendering them full-time employees. Luiz Marinho, Brazil’s new Minister of Labor, explained that if Uber were to leave Brazil instead of complying, he will direct the Post Office to create a similar ride-sharing application:
“What if Uber leaves [Brazil]? Uber problem. I'm not worried….I can call Correios, which is a logistics company, and say to create an application and replace [Uber].”
Brazil’s crypto market shrinks 24% in 2022
Brazilians reported R$154 billion (US$30 billion) in cryptocurrency transactions in 2022, down 24% year-over-year, according to data from the Receita Federal, Brazil’s tax authority. 2021, the peak of the crypto bull market, saw R$204 billion (US$39 billion) in reported transactions.
More than 62,000 CNPJs (unique businesses) performed crypto trades during December 2022. This is up from just ~10,000 in January 2022.
The figure is up more than 35% from November, which saw 45,000 CNPJs report crypto trades.
The number of CPFs (unique individuals) who transacted in December was down 22% - to 909,000 from 1.17 million (CoinTelegraph Brasil)
Chiliz, Matic and XRP were among the preferred altcoins for the month
🗞Brazil Crypto News Rundown
2023 will be a year of “cleanup” for the crypto assets industry as more serious players enter the space, Andre Portilho, BTG Pactual’s head of digital assets, argued in an interview with Reuters:
"Companies without a sustainable business model, that did stupid things, that didn't treat their customers well, that leveraged too much, those will fall by the wayside…Nothing that happened with crypto has not happened in other industries in the past ... Going forward, the trend is to clean up the industry, have more regulation and have more structured companies entering this market."
Arthur Mining, the US-based bitcoin miner run by Brazilians, raised a round of US$4.6 million to expand its green mining operations. It projects a 400% growth in its operation in the US, and it intends to launch a mining operation in Brazil, both of which should in theory allow the company to reach US$40 million in revenues for 2023. CEO Ray Nasser explained:
“Closing a round of this size in the midst of one of the most challenging times in the market, with other companies in the sector undergoing judicial reorganization and bankruptcy, was a great milestone for Arthur. As ASICs have a high price correlation with Bitcoin, the moment to expand operations was as opportune as possible, being able to acquire the assets at a great discount, including part of the inventory of less efficient players in the market.” (InfoMoney) (CoinTelegraph Brasil) (Livecoins) (Forbes)
Nubank’s Board of Directors approved the issuance of Nucoin, the digital bank’s crypto asset. The bank intends to launch Nucoin in the first quarter of 2023 from the Cayman Islands, where Polygon Labs - which is providing technical support - is headquartered. (CoinTelegraph Brasil) (InfoMoney)
Nubank also announced that it had laid off 40 individuals, on top of a previous round of cuts in December
Zro Bank, the multi-currency digital bank, is experimenting with new verticals, such as its “Pix-as-a-Service” offering, in an effort to diversify away from crypto during the bear market. (BlockNews)
LocalBitcoins, one of the leaders in the Latam peer-to-peer market, is shutting down after more than a decade in operation - blaming the “extremely harsh crypto winter”. (Portal do Bitcoin) (CoinDesk)
$MENGO, Flamengo FC’s fan token, slumped 16% after the club’s 3-2 loss against Al-Hilal in the FIFA World Cup in Morocco. (CoinTelegraph Brasil)
Baby Doge Coin surged into the top five most-traded coins by Brazilians by volume, per data from Livecoins
Participants in the Central Bank’s Digital Real Lift Challenge will participate in a pilot test designed to assess information leakage about transactions on the protocol. (CoinTelegraph Brasil)
LoveCrypto a startup born out of the Federal University of Pernambuco, is one of the nine participants in the current Lift cohort
Roberto Campos Neto spoke about the Digital Real and Pix at a Milken Institute event in Florida
InfoMoney’s Paulo Alves wrote a good article discussing the similarities between the Digital Real (as it’s currently envisioned) and cryptocurrencies. While the Digital Real itself will not be a cryptocurrency, it will share some of the properties: most notably, an Ethereum-inspired composable network on which assets will live and travel. Fábio Araújo, project lead for the Digital Real at the Central Bank, explained:
“The biggest gain anticipated by the adoption of a network like the one being developed for Real Digital derives from programmability and the capacity for successive developments based on smart contract technology.”
CoinTelegraph Brasil named Liqi and MB Tokens the top crypto companies in Brazil for 2022. Liqi reached R$45 (US$8.6) million in tokenized assets and 12,000 investors during the year. MB Tokens, for its part, tokenized R$118 million (US$22.6 million) worth of assets.
The first purchase of agricultural equipment with tokenized grains was made at a fair in western Parana, via a new partnership between Agrotoken and CNH Industrial that creates tokenized agricultural products. Agrotoken aims to tokenize more than one million tons of grains this year. Anderson Nacaxe, Agrotoken’s director in Brazil, stated:
“The agricultural market already is, and it is increasingly digitized. What Agrotoken offers today is one more tool to democratize agribusiness, making transactions with soy and corn real.” (Globo) (Forbes)
Nostr, a decentralized social media protocol created by a Brazilian under the pseudonym “fiatjaf”, has attracted the attention of the bitcoin community and others on the hunt for an alternative to Twitter. (Portal do Bitcoin)
Paxos, the infrastructure and stablecoin provider for Brazilian crypto operators like Nubank and Mercado Pago, is being investigated by US financial regulators. (InfoMoney)
Bitcoin ATM operator Coin Cloud filed for bankruptcy with estimated liabilities of between US$100 million and US$500 million. Coin Cloud has 4,000 terminals across the US and 30 in Brazil. Isabella Rossa, country manager for Coin Cloud Brasil, told InfoMoney that the local operation is not impacted by the process and that it holds a “healthy financial situation”. (CoinDesk)
Fan token platform Chiliz announced its own Layer 1 EVM-compatible blockchain. Brazilian clubs such as Flamengo, Fluminense, Vasco, Corinthians, Palmeiras and others have issued fan tokens in partnership with Chiliz. (CoinTelegraph Brasil)
ZCore announced a new tool called Web3Pix which allows for converting to Pix funds to Web3 tokens through a browser or WhatsApp without giving up personal custody of the assets. (CoinTelegraph Brasil)
The state of Goiás intends to transform itself into one of the most digitally-friendly in the country after signing an agreement with ANATEL, the national telecomms agency, to promote metaverse, blockchain and other Web3 projects. (CoinTelegraph Brasil)
Mercado Bitcoin is partnering with the Polytechnic School of the University of São Paulo to create a summer program focused on developing talent for the exchange.
The Saque e Pague network is partnering with Monnos to bring crypto withdrawals to more than 2,500 ATMs across Brazil. (CoinTelegraph Brasil)
Gate Charity, affiliated with the exchange Gate.io, hosted a charity event involving a shelter for abandoned animals Minas Gerais (CriptoFacil)
Brazilian influencer Izzy Nobre published a post saying Pix is better than bitcoin. Nobre famously got into a scuffle with Brazilian bitcoin pioneer Daniel Fraga in 2013. (Portal do Bitcoin)
🎮 NFTs, Gaming and Metaverse
Launching an NFT collection isn’t as easy as it might seem. BeinCrypto ran an interesting piece looking at the unsuccessful launch of a collection in honor of Roberto Dinamite, the Vasco da Gama football legend. Filipe Iório, the man behind the collection, explained that the Mercado Pago payment gateway blocked the account on the intended day of launch - forcing a reschedule. Dinamite then succumbed to health problems. Iório explained:
“By the amount of authorization, we would have had about 200 sales, which did not pay our costs, but it ended up being lost and the launch flopped.”
“Twitter Blue” has been enabled for Brazilian users, which allows for the use of NFT profile pictures. (CoinTelegraph Brasil)
GGSofthouse, a Brazilian Web3 game development studio, has partnered with Polygon Labs to develop a gaming hub for Latin America. (CoinTelegraph Brasil)
Metaverse platforms Upland and Decentraland are partnering to create a Carnaval metaverse experience. (CoinTelegraph Brasil)
CriptoFacil ran a post-mortem on CryptoCars, a play-to-earn game that was highly popular in Brazil last year before spectacularly imploding
🏛 Public Policy, Regulation and Enforcement
The National Financial System Registry Council (CRSFN in Portuguese) ruled that Iconic’s 2018 initial coin offering was an irregular securities offering.
The project incurred a fine of R$387,000 (US$74,000) and its founder Jonathan Doering Darcie only received a warning. Tiago Severo of Caputo, Bastos and Serra Advogados argued that the decision sets an important precedent for token taxonomy in Brazil.
The case had been going on since 2018 when the CVM filed an initial sanction against Iconic for carrying out a securities offering without the CVM’s approval
Severo told Valor:
The Public Ministry of Paraíba is investigating customer complaints against Braiscompany, a cryptocurrency investment company, for allegedly losing customer funds and expects to file a civil suit in the coming week. (Portal do Bitcoin) (InfoMoney)
Odin Bezerra, an alderman from João Pessoa, is speaking out on behalf of Braiscompany customers who have been unable to recover their funds.
“Faced with this scenario that I have been following since the beginning, I was touched by the situation of some people who spent their whole lives saving, saw an opportunity, and now have found themselves in a real ordeal in the last two months with this situation at Braiscompany.” (Portal do Bitcoin)
One Braiscompany investor sold R$2 million (US$383,000) worth of luxury cars for contracts with the firm and has filed a lawsuit in Paraíba alleging a pyramid scheme. (Portal do Bitcoin)
Other disgruntled customers continued to protest in front of the Braiscompany headquarters, saying they were tired of excuses from the company
Federal Deputy Julian Lemos of Paraíba deleted an Instagram post that he had made last month in support of Braiscompany owner Antonio Neto Ais
Felipe Pontes, a Paraíba-based accountant, says that Braiscompany’s balance sheets are full of errors and dubious data and argues that customers are “extremely unlikely” to get their money back (Portal do Bitcoin)
Four-time world boxing champion Acelino 'Popó' Freitas revealed that he invested R$1.2 million (US$230,000) into the pyramid. (Portal do Bitcoin)
Financial influencer Tiago Reis, who was one of the first people to call out Braiscompany as a pyramid, took to social media to take a victory lap of sorts
Bitso published a guide laying out its core principles for crypto regulation. These include safe custody of funds, technology neutrality and an inclusive financial system. (Portal do Bitcoin)
CoinTelegraph Brasil published a list of 10 tips for Brazilians who need to pay taxes on cryptocurrency gains in 2023
Indeal, a cryptocurrency pyramid that promised high monthly returns to investors, was declared bankrupt by a court in Rio Grande do Sul. An estimated 23,000 customers invested an R$1 billion (US$200 million) into the firm. (CriptoFacil)
A São Paulo court is looking into whether to hold Binance accountable for funds lost by a client as a result of the UST stablecoin collapse last year. (Portal do Bitcoin)
The Special Unit for Cryptoassets of the Public Ministry of the Federal District and Territories (MPDFT) issued a warning to crypto investors about financial pyramids and other scams. (Portal do Bitcoin)
The Receita Federal and Federal Police launched Operation Trap Coin against an alleged pyramid scheme that has moved R$170 million (US$32.6 million). (BlockNews)
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