🇧🇷BCR #83: Blackrock CEO touts Brazil as model for payments innovation

Plus: Hashdex rings bell at NYSE; asset segregation rules in danger?

Olá pessoal!

Welcome to 🇧🇷Brazil Crypto Report for the weeks of March 13 - March 17, 2023!

I’m happy to say that I finally got my phone number reinstated after getting SIM-swapped last week. Not a pleasant experience at all but it was a nice reminder to implement 2FA across the board.

Thanks to everyone who came out to the event with Chris Giancarlo at Veirano Advogados in São Paulo last week. I enjoyed the opportunity to see some familiar faces and make some new friends.

🎙Be sure to have a listen to my latest podcast with Maurício Magaldi where we discuss the future of asset tokenization in Brazil, regulation and a bunch of other fun stuff. Have a look on YouTube below, and you can listen on Spotify as well.

I also wanted to reflag another recent episode I recorded with Gustavo Cunha about the Brazilian Central Bank’s Digital Real CBDC. Definitely worth a listen if you’re not fully up to speed on this project.

Thanks everyone for reading and I hope you have a great week!

-AWS

Larry Fink cites Brazil as a model of payments innovation

In his annual letter to investors, the Blackrock CEO cited Brazil as an example of a country that has made great strides in payments innovation, while bemoaning the fact that the United States is falling behind in this area. Blackrock is the world’s largest and most influential asset manager, with over US$8 trillion in AUM.

The letter states:

“In many markets, such as India, Brazil and parts of Africa, we are witnessing a giant leap forward in digital payments and cost reduction and financial inclusion. In contrast, many developed markets, including the United States, are lagging behind in innovation, leaving payment system costs much higher.”

Fink also touted the potential benefits of asset tokenization as a means to “drive efficiency in capital markets, shorten value chains, and improve cost and access for investors.”

Ethereum Rio 2023 happening March 28-30

This year’s event will feature two days of mainstage programing, instructional workshops and a Web3 Impact bootcamp focused on evangelizing young people about the opportunities presented by Web3. Among the confirmed attendees include participants from the Complexo do Chapadão and Rochina communities, with an expectation of representative from several more.

Carol Santos of Ethereum Brasil, the organizer, told CoinTelegraph Brasil:

“We are building an ecosystem, these people need to have their voices recognized, their projects built. For a systematic change to happen, the only way is education. How are these young people going to empower themselves with a technology and use it in their favor, if they don't even know about it?

“If there is at least one young person from each community at the event willing to pass the knowledge on, it is enough to create a snowball effect”

Fate of asset segregation rules still uncertain

The Brazilian Central Bank may not have the legal cover to require crypto brokerages to segregate assets and may need a legislative remedy in Congress to obtain this mandate. This provision was left out of the crypto bill that was signed into law in December, but the market’s expectation was that the Central Bank would include this in its regulatory framework.

Speaking at an event last week hosted by Veirano Advogados, Central Bank attorney Humberto Cestaro stated that the institution has yet to make a decision on the matter. Further, he stated that Congress may need to revisit the topic for the bank to have full authority to require this:

“To have a solid legal foundation, the segregation of assets needs to come by means of law. In some bill that is being discussed in Congress, this topic may be included”.

Folha de S. Paulo reported last December that the Central Bank would indeed impose asset segregation on brokerages as soon it was formally nominated to be the regulator for the industry.

👀Trending cryptocoins in Brazil via CoinGecko

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🗞Brazil Crypto News Rundown

📈 Markets

• Crypto asset manager Hashdex rang the opening bell at the New York Stock Exchange last Wednesday to celebrate the six-month anniversary of its Bitcoin Futures ETF. (Portal do Bitcoin)

• Hashdex also assured clients that it had no exposure to Silicon Valley Bank, Silvergate Bank or Signature Bank. The company said in a statement:

"We use multiple bank accounts, at different institutions, for our funds. In general, given that each Hashdex fund is fully allocated in crypto assets, the remaining dollar balances in bank accounts are marginal. Our main use for US bank accounts is receive contributions, pay redemptions and settle crypto asset transactions." (InfoMoney) (Valor Investe)

• Many Brazilian crypto investors are being taken by surprise by the Receita Federal’s recent changes to crypto reporting rules. The tax authority has been cross-referencing declarations made by exchanges with individual taxpayer filings.

  • When taxpayers fill out their income tax declarations, the cryptocurrency sections come already pre-populated with data reported by brokerages pursuant to Normative Instruction No 1,888 (an measure that requires exchanges to report their users’ crypto transactions to the Receita Federal)

  • Any user with more than R$5,000 in cryptocurrency holdings is required to report the amount on their return, irrespective of whether they used a national or international exchange to acquire the assets.

  • International exchanges like Binance that do not have a Brazilian CNPF registration are not required to report customer transactions to the RF (a point of significant contention within the industry!). Therefore, amounts traded on these exchanges will not be reflected in the pre-populated balances on customer tax statements.

  • In some cases, these pre-filled balances reflect accounts from exchanges that the user either forgot about or didn’t realize would be immediately reported.

"I thought they were only going to take the exchanges, but cryptocurrencies that I had in digital banks and payment fintechs are also in the statement. Now it's time to call an accountant and see what can be done". (CoinTelegraph Brasil)

• 35 of the most 50 profitable multimarket funds in 2023 in Brazil have exposure to digital assets, according to Mais Retorno. (CoinTelegraph Brasil)

• Mercado Bitcoin listed Tether (USDT) in light of USDC losing its peg earlier this month. (Portal do Bitcoin)

• José Carlos Fernandes da Fonseca, national supervisor of the income tax program at Receita Federal, told InfoMoney that the agency may find out in the future if users failed to report assets held or traded on foreign exchanges:

“The citizen says 'I'm going to hide these cryptocurrencies here because the Revenue does not have this information'. OK, we might not have it now, but we might have it next year or two years from now. We have up to five years to be able to act on the declaration.”

• Magalu, the fintech owned by Magazine Luiza, is studying the creation of a native loyalty token, similar to those developed by Nubank and Mercado Livre. The company announced its entry into the digital asset space earlier this month via a partnership with Mercado Bitcoin. Leandro Hespanhol, commercial and new products director, told Valor:

“We are just getting started with crypto assets. First, with buying and selling digital currencies within our platform. Bringing financial technology and cryptocurrencies to our consumers and partners is something we are following closely. It is a product that is here to stay and there is no going back.”

• Brazil crypto stakeholders don’t see the anti-crypto animosity that provoked the US banking collapse spilling over into Brazil. Rather, the fact that Brazilian authorities have been more consistently supportive of the innovation has left many sleeping easier at night. While there has historically been tension between Brazilian banks and crypto companies, there isn’t a clear path for investors to lose access to this market. Fabrício Tota of Mercado Bitcoin told InfoMoney:

“It is possible that some banks in Brazil may be inspired by what is happening in the US and seek an offensive against the crypto market. But, in general, this would sound more like an attempt to inhibit the growth of the crypto industry than a response to increased regulatory scrutiny.”

📱Adoption

• Febraban, a trade group representing Brazilian banks, formed a working group focused on assisting the Brazilian Central Bank with Digital Real development. About 15 representatives from member banks will participate and focus on technical issues like security, resilience, interoperability and scalability. Leandro Vilan, executive director of innovation, banking products and services at Febraban, told InfoMoney:

“In a first moment, the digital real will probably have more applicability for the legal entity. It will not be used on a large scale by individuals. The market will still develop. What we are building is an infrastructure that allows for the tokenization of these deposits. And from there, you open up a range of opportunities for other products and services in the financial system.”

• Hardware wallet maker Ledger partnered with e-commerce platform KaBum! to distribute wallets in Brazil. The available supply was reportedly exhausted after just one day. (Crypto Times) (CoinTelegraph Brasil)

• Mercado Bitcoin and Coinext were named as the top two cryptocurrency companies of 2022 by the CoinTelegraph Brasil editorial team.

• Tokenization house BlockBR hired 38-year veteran Marcello Aragão as a marketing and strategy consultant. He has previous experience at BBA Creditanstalt, Lehman Brothers, Itaú and XP Investimentos. (BlockNews)

• Binance is hosting a community meetup in São Paulo on March 21.

• SmartPay’s Swapix has integrated the Tether Gold stablecoin, making it possible to guy the token directly from a banking application and to use it to may bills or make purchases. (BlockNews)

• Visa reported that tokenized payment settlements in Brazil in the month of January were double the amount realized during the same period for 2022. (CoinTelegraph Brasil)

• Brazil and Italy signed a memorandum of understanding to cooperate on disruptive technology projects, including blockchain and cryptocurrency, for the next five years. (CoinTelegraph Brasil)

• Brazilian developer First Phoenix Studio launched a collection of NFTs entitled “A Rebellião dos Crias” which represent 5,500 characters from the Rio-X blockchain game. The game is a post-apocalyptic first person shooter game set in the South Zone of Rio de Janeiro. (CoinTelegraph Brasil)

• Brazilian footballer Adriano Imperador is entering the metaverse with the launch of his “Didicoverso” VR environment in partnership with DUX. (Exame)

• Crypto exchange Bybit is exploring the launch of a crypto debit card product in Brazil. (Livecoins)

🏛 Public Policy, Regulation and Enforcement

• At-large Braiscompany founder Antonio Neto Ais took responsibility for the collapsed company last week in an Instagram post.

  • He stated that the “responsibility was fully mine” in all capital letters.

  • Neto and his wife have been fleeing from Brazilian authorities since mid-February after the Braiscompany headquarters in Paraiba was raided.

  • He blamed the collapse of Braiscompany on external factors such as the imploding crypto market and the downfall of FTX. He further claimed to be an victim of unjust persecution:

“We found ourselves without resources, without a car, without a home, without freedom! Totally hostage to this situation…“I didn't mean to do any harm, it wasn't planned but I failed in the face of everything that has already been said.” (Portal do Bitcoin)

• The Public Ministry of Paraíba found several new bank accounts in the name of Neto Ais and his wife Fabricia Campos and is looking to freeze them. (Portal do Bitcoin)

• Brazil’s Public Ministry published a manual instructing prosecutors on how to seize cryptocurrencies and other matters related to investigating crypto-related crimes. (Portal do Bitcoin)

• The Public Ministry of Paraíba has opened an inquiry in Fiji Solutions, another alleged crypto pyramid based out of Campina Grande. The company, founded at the end of 2021, has ceased making promised payouts to investors. Bueno Aires José Soares de Souza, one of the partners, blamed Singapore-based exchange Kucoin in an interview with local news:

“Today the problem is simply a difficulty imposed by KuCoin for me to prove that I am myself, this is the big factor. The amount inside the brokerage (supposedly arrested) exceeds US$ 80 million (about R$ 420 million).” (InfoMoney)

• InfoMoney ran a profile on Xland, a cryptocurrency pyramid that featured former Palmeiras footballer Willian Bigode as a supposed partner. The operation similar to other “rental coin” services that borrow tokens from investors and pay back a fixed return every month in exchange. It also offered a precious stone called alexandrite as collateral to attract customers

  • Willian, who currently plays for Fluminense, took to social media to claim that he “is not a scammer” and that he also lost money with Xland (an estimated R$17 million (US$3.22 million). Per Valor, he stated:

"I didn't take anyone's money. I'm also a victim. Until today I didn't take my appeal."

• Portal do Bitcoin reports that Willian had a friendship with Braiscompany CEO Antonio Neto Ais and had even visited his mansion. Neto published a photo, taken in his mansion in Morumbi, of the two on Instagram in which he called Willian “brother”.

• Federal Police served warrants for the arrest of a judge, Candido Ribeiro, and his son in Operation Habeas Pater. The two are suspected of selling sentences to drug dealers and amassing real estate, cryptocurrencies and luxury cars. (Portal do Bitcoin)

• A supposed NFT and cryptocurrency pyramid operation based out of Florianopolis that paid 10% monthly returns to investors has closed down, leaving investors unable to get their money back. (Livecoins)

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