🇧🇷BCR #84: Coinbase goes live in Brazil as US woes mount
US powerhouse exchange pushes ahead with global expansion amid new round of attacks from SEC
Welcome to 🇧🇷Brazil Crypto Report for the week of March 20 - March 24 2023!
Quick public service announcement that I’ll be speaking at Ethereum Rio next week. I’ll be around most of the week doing some podcast interviews so please ping me if you’ll be around and would like to meet up in person. I’ll be around for the first couple days of ETHSamba as well so please do say hi!
This week I paid a fun visit to William J. Howey’s mansion in central Florida. Howey was the central figure in the 1945 US Securities and Exchange Commission v. W.J. Howey Co. case, in which the US Supreme Court ruled that his scheme to sell parcels of Florida orange groves was an unregistered securities offering. The “Howey Test” has since become the standard in the US (and around the world) for determining whether an investment scheme is deemed a “security”.
For 70 years this was an obscure court case only of interest securities lawyers and law students, but it quickly became a household name in the world of cryptocurrencies amid the initial coin offering boom of 2017.
If you’ve been around crypto for any amount of time, you can probably recite the four prongs of the Howey Test from memory: 1) investment of funds, 2) in a common enterprise, 3) with the expectation of profits 4) derived from the efforts of others.
I was grateful for the opportunity to pay my respects to Mr. Howey.
Also, definitely have a listen to my most recent podcast episode with João Zecchin of Fuse Capital and Paulo Alves of InfoMoney discussing the economic implications of the Brazilian Central Bank’s proposed Digital Real. The Digital Real project is a big deal and it’s well worth your time to get smart fast on the developments. Can also listen on Spotify here.
Thanks everyone for reading and I hope you have a great week!
Coinbase officially launches in Brazil as pressure mounts in the US
The U.S.’s leading crypto exchange has officially launched in Brazil after two years of preparation behind the scenes. The announcement comes as U.S. regulators have been ramping up pressure against the company, prompting it to look more aggressively at expanding overseas and internationalizing its business.
Coinbase arrives in Brazil with a platform supporting trading of 240 digital assets, staking and yield services, a digital wallet and an NFT marketplace. Fabio Plein, Coinbase’s country manager for Brazil, told InfoMoney:
“We are bringing to Brazil the same user experience that made us the leading exchange in the US, which is a super important crypto market, and which, today, more than 100 million people use around the world.”
The exchange also revealed that it had been served a Wells Notice by the U.S. Securities and Exchange Commission, meaning that the agency is pursuing an enforcement action against the company - likely for listing unregistered securities.
CEO Brian Armstrong told Valor in an interview:
“The US has been somewhat slow to create regulatory clarity. We see that places like Brazil, Hong Kong, Singapore and the UK have made the most progress. This leads us to invest in markets such as Brazil.”
“We believe, based on customer surveys, that all financial services companies in Brazil should somehow integrate cryptocurrencies into their platforms. These are products that Coinbase has been dedicated to for a long time, and these are services that customers want [on platforms].”
Armstrong also gave an interview to Exame, in which he made similar statements about Coinbase’s health amid the banking crisis in the US and its competitive positioning in the Brazil market.
Coinbase will partner with Ebanx for local banking and payment services. Ebanx also works with other name brand tech companies like Airbnb, Spotify and Uber. The exchange has also begun integrating with Pix and has built a Portuguese language app fully equipped with 24 hour customer support.
Nana Murugesan, VP of International and Business Development, said in a statement:
“While we are enhancing our product offerings today, we have a strong history in Brazil…We established a technology hub in the country in 2021, with engineering talent developing crypto and Web3 technologies using Brazilian expertise for Brazil and beyond.”
Murugesan also highlighted that Coinbase Ventures, the company’s VC arm, has been focusing on the Brazil and has invested in companies such as Ledn and Hashdex.
Plein further highlighted the country’s openness to the technology and willingness to implement a sound regulatory environment as a stark difference from the US. He told The Block:
"Brazil is a great example of a country in which regulators have understood the value of crypto and they are creating a very healthy debate around the topic to keep innovation and growth going.”
In a separate interview with InfoMoney, Plein added:
“The signs that we have been seeing are optimistic, we feel comfortable to be present and launch our operation in Brazil seeing regulators with this openness to debate, to collaboration, to build something positive for society.”
There had previously been speculation that Coinbase would attempt to enter Brazil through an acquisition. It was rumored to be in talks to acquire first Bitso and then 2TM Group, the parent company of Mercado Bitcoin.
Bitso receives payment institution license from Brazilian Central Bank
The institution approved the application of Nvio Brasil, the corporate name of Bitso’s Brazil operation, to be a licensed payment institution in the country. The designation means that the crypto exchange can now issue electronic money and postpaid payment instruments, and it brings the exchange closer to its objective of becoming a digital bank of sorts built on crypto rails.
Electronic money issuers can manage prepaid payment accounts in which funds are deposited in advance. Postpaid payment instruments include products like credit cards and the ability to grant credit limits to customers.
Other exchanges operating in Brazil such as Mercado Bitcoin and Ripio have also applied for the payment institution license.
According to the license, Nvio has a capital reserve of R$65.9 million (US$13 million) and lists Daniel Vogel Fernandez de Castro, José Pablo Gonzalez Delezé and Benjamin Joel Peters as its controllers. (Valor)
🗞Brazil Crypto News Rundown
Hashdex CEO Marcelo Sampaio took aim at U.S. competitor Grayscale in an interview with The Block. "We work with regulators. We don't sue them,” he said, in reference to Grayscale’s lawsuit against the SEC.
Traders Club launched a new active management crypto fund that will seek to outperform bitcoin.
Fund balancing decisions will be made through a combination of quantitative algorithms and human decisions.
The announcement comes on the heels of TC’s purchase of Pandhora, an asset manager specializing in quantitative strategies.
The fund’s assets will be custodied at Coinbase and audited by Deloitte. It is expected to reach R$40-R$50 million (US$7.6m - US$9.5m) in total shares sold.
It will be available to accredited investors who have more than R$1 million (US$190k) with a minimum contribution of R$10,000 (US$1,906).
TC’s Paulo Boghosian stated that the universe of crypto funds in Brazil currently has few actively managed options:
“For a lot of people the ETF works as a first exposure to crypto. Now, in a second step, people will seek active management. That's why it's good to have bitcoin as a benchmark to challenge ourselves to obtain a performance well above a passive hold.” (Valor)
Honey Island Capital, a Brazilian VC launched by the founders of Ebanx, has set up a new investment fund focusing on liquid Web3, decentralized finance and digital assets. The fund will be able to allocate upwards of US$20 million. It will commence activities with capital contributed from the partners but will allow the entry of capital from new customers. Gean Chu, partner at the VC, told CoinTelegraph Brasil:
"As much as Web3 still carries a lot of volatility, the adoption of large institutions has been increasing. There are many initiatives focused on this market, but there was no vehicle in the Brazilian market dedicated to investing in innovations based on blockchain and acting natively , that is, using DeFi protocols and multi-chain wallets. The idea is to use blockchain as the technology was born to be used.”
Mercado Bitcoin listed ARB, the governance token of the Arbitrum network which was airdropped last week. (CoinTelegraph Brasil)
Binance reinstituted trading fees for trading pairs involving BTC, effectively ending a promotion it launched last summer to commemorate its five year anniversary. (Livecoins)
Despite the recent rally in the price of bitcoin, Brazilian market analysts aren’t convinced that an “alt season “ is approaching anytime soon. (CoinTelegraph Brasil)
Mercado Bitcoin paid out R$697,000 to holders of its Santos FC token as compensation for the transfer of Emerson Palmieri to West Ham United of the UK. The token is backed by the rights, pursuant to the FIFA solidarity mechanism, that Santos to a basket of 12 players formed by the club. (Portal do Bitcoin) (CoinTelegraph Brasil)
Brazilian environment-focused tokenization projects could see a future home in Germany through a new partnership between SAP and the Germany Development Agency. (CoinTelegraph Brasil)
Bitypreço is discontinuing its smartphone application to focus on its web platform and the app for Bitybank, which is the cryptobank launched following the acquisition of Biscoint last year. CEO Ney Pimenta said in a statement:
“This action is necessary and is in line with our strategy of uniting crypto and digital banking, offering a simple and complete experience. Our next steps are to offer a complete Pix area, with an account for payments and transfers, and a card for day-to-day use of cryptocurrencies, with cashback also in crypto”. (CoinTimes)
Valor published an interview with Chris Giancarlo, the former head of the Us Commodity Futures Trading Commission who is now known as “Crypto Dad”, which took place at an event hosted by Veirano Advogados in São Paulo earlier this month. Giancarlo stated that he was impressed by Brazil’s emerging crypto regulatory landscape:
“It is a tremendous opportunity for Brazil, as the US is moving away from crypto assets. We will see a slowdown in innovation in the US. Europe and Asia are not doing this. Today, USA is not the model to be followed.”
Brazilian supermodel Gisele Bündchen spoke publicly about her involvement in FTX for the first time since the exchange collapsed in an interview with Vanity Fair. Bundchen, who was named as FTX’s “director of social and environmental initiatives”, blamed her financial advisors for allowing her to invest in the platform and believing the hype around Sam Bankman-Fried. She also described the collapse as “terrible” and that she prayed that justice will be served.
“I was taken by surprise. I am no different than everyone else who has relied on the hype…. It's just… terrible…I'm sorry for all of us that this happened and I pray that justice will be done.” (CriptoFacil) (Exame) (Livecoins)
Sthorm, a Brazilian blockchain and tokenization project, announced two new names to its board of directors: Bob Richards, an entrepreneur and NASA collaborator who worked alongside Carl Sagan; and Scott Bagby, who was one of the first Skype team members. (CoinTelegraph Brasil)
The ETHSambal hackathon will be taking place March 31 - April 2, immediately following Ethereum Rio, at the Florida Convention Center and Republic Museum in Rio’s center city. (CriptoFacil)
A new Brazilian initiative called Blockdeaf is trying to create a universal sign language to teach Web3 concepts to the hard of hearing. (CoinTelegraph Brasil)
The Digital Real figures to be a powerful level for advancing the asset tokenization economy in Brazil, several industry stakeholders told CoinTelegraph Brasil.
WEB3DEV is launching a free course to train Solana developers. Programmers will learn how to build apps on the network using Rust for smart contracts and React for user interface. (Portal do Bitcoin)
🎮 NFTs, Gaming and Metaverse
The Jungle, a Brazilian Web3 gaming studio, closed a US$6 million funding round led by Bitkraft and Framework Ventures. (The Block)
Brazilian television network Rede Globo will distribute an NFT series based on the telenovela Todos as Flores. (Exame)
The city of São Paulo announced a new event called Virada Cultural do Metaverso, held May 27-28, with the expectation of convening one million people. The city will reportedly spend R$10.1 million (US$1.9m) on the activation. (CoinTelegraph Brasil)
Two Brazilian communities were selected as winners of the “Communities of the Metaverse Challenge” held by the Inter-American Development Bank and Meta (aka Facebook). Clube da Alice and Socialcrypto.art are the names of the winners. (CoinTelegraph Brasil)
A new Web3 company called Pega Visão Salvador Club launched an NFT collection highlighting the African culture of the city of Salvador. (CoinTelegraph Brasil)
Greener launched its “Voice for the Amazon” NFT series to celebrate International Day of Forests. The campaign aims to offset 1,150 tons of carbon. (Cointelegraph Brasil)
Metaverse and Web3 themes was on display at Encontro Mica, an international architecture and construction convention in Rio de Janeiro. (CoinTelegraph Brasil)
🏛 Public Policy, Regulation and Enforcement
The Receita Federal is hosting a free class to help taxpayers understand how to report cryptocurrencies on their income tax filings. (Livecoins)
Crypto tax specialist Ana Paula Rabello addresses the question of whether Binance is reporting user trading data to the Receita Federal. Her answer isn’t so straightforward:
“There is no consensus on the mandatory IN 1888/2019 for Binance in Brazil. While the company does not recognize the requirement of the rule, it is understood that it is still mandatory to inform Binance as a foreign company in its declarations. There has not yet been (as far as we know) an official report by the company, which generates reflections and doubts about its performance in the country.” (Portal do Bitcoin)
Valor and InfoMoney reported on a growing number of instances of cryptocurrency pyramids involving Brazilian footballers, most recently Gustavo Scarpa, Mayke Rocha Oliveira and Willian Gomes de Siqueira. Combined, the athletes claim to have lost R$30 million (US$5.7 million) in an alleged fraud scheme. (Valor Investe)
A survey by InfoMoney shows at least 23 alleged cryptocurrency pyramid companies in Brazil that have been discovered over the last five years. More than four million victims have lost R$40 billion (US$7.6 billion) in these schemes, the publication estimates.
A prank investment scheme website setup by the CVM and Anbima promising high and unrealistic profits demonstrated that upwards of 50% of Brazilians would have potentially fallen for the scam. (Portal do Bitcoin) (CriptoFacil) (CoinTelegraph Brasil)
A Receita Federal employee will travel to Santiago, Chile to participate in an event hosted by the Western Hemisphere Cryptocurrency Working Group, an event sponsored by the U.S. Department of Justice. (Portal do Bitcoin)
In a new self-regulatory play, ABCripto, a trade group representing the crypto industry in Brazil, is launching a seal of approval to certify entities that act with integrity and security. To earn the seal, companies must undergo an assessment carried out by Deloitte and KPMG auditors. (CoinTelegraph Brasil)
Federal Police dismantled an alleged cryptocurrency tax evasion scheme based on the border of Brazil and Uruguay, in an enforcement action called Operation Harvest. (CoinTelegraph Brasil)
Civil Police in the state of Goiás arrested the leader of an alleged crypto pyramid scheme that has been the subject of complaints from 20 victims, in an action called Operation Dissimulato. (Livecoins)
Daniel Constantino, an accountant and partner at Grupo Primo, lays out useful tips on declaring cryptocurrency taxes. (Livecoins)
Blockchain and cryptocurrency subjects are being taught to a training cohort for future judges in São Paulo. (Portal do Bitcoin)
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