🇧🇷BCR #89: LIFT-off at Banco Central
BC's LIFT Day showcases Digital Real use cases as CBDC pilot ramps up
Welcome to 🇧🇷Brazil Crypto Report for the week of April 24-28. It was great meeting a bunch of readers and seeing some old friends at Consensus week in Austin - many thanks to everyone who stopped by to say hi at the Filecoin Network Base side event, at the Protocol Village stage inside the main event or at the Brazil Builders Breakfast I co-hosted with Conor from Ethereum Brasil.
The main event was more US-focused than it has been in years past, mainly because all of the crises impacting the crypto markets at the moment are germane to the US. I’ve been lobbying the CoinDesk Consensus team hard to take a more international approach next year as that’s where all of the smart money in crypto is focusing now. We’ll see what comes from that.
I’m not able to attend Web Summit Rio unfortunately as I have some personal things to take care of in the US but it appears to be shaping up to be a pretty cool event. Look forward to hearing/seeing what folks think of it.
This past week’s news was all about the Central Bank’s LIFT Day, so let’s dive right into that.
Banco Central hosts Digital Real LIFT Day
The Brazilian Central Bank hosted its largest-ever Digital Real-focused event on April 25th in partnership with Fenasbac. Hosted at the Banco Central headquarters in Brasília, the event convened its nine LIFT Lab cohort participants to showcase the pilot projects and use cases they’ve been developing over the last year.
The Digital Real will be the third pillar in the Central Bank’s innovation agenda - the first two being Open Finance and Pix.
Below are some of the highlights:
Santander Brasil showcased its prototype for tokenizing cars and real estate in a bid to minimize bureaucracy in the purchase and sale process. The project would ideally allow for instant vehicle transfers using the Digital Real. Evandro Camilo, leader of digital products at Santander Brasil, told InfoMoney:
“Issued the purchase and sale order of a vehicle, for example, the transfer of ownership would happen automatically.”
However, the main challenge with such a system, he points out, is ensuring interoperability between all the parties involved - including Santander, the Central Bank, transportation and real estate authorities, buyers/sellers and marketplaces. Camilo explained:
“It is not an easy task to perform. It would be the integration of 27 Detrans (DMVs) notary offices, real estate registry offices, among other entities.”
MB, in a consortium with Stellar, Clear Safer, Cheesecake Labs and CPQD, demo-ed its project that allows a user to sell a tokenized precatory directly to a buyer using its the MBRL stablecoin.
Fúlvio Xavier, head of special projects at MB, told Portal do Bitcoin that the most important step in the project was creating a digital identity with the necessary certifications so that the user can transact while respecting KYC/AML.
Capitual and TecBan
The Smart Cabinets project used a private Ethereum network to create a package locker system whereby the financial transactions are carried out only once the buyer enters the code and physically picks up the package from the locker. Luiz Fernando Lopes, digital platforms manager at TecBan, commented:
“We noticed that this increases the efficiency of logistical processes and guarantees the delivery of the financial value negotiated through the validation and finalization of the delivery, which in this case is represented by the closing of the closet door.”
Visa and its partners Agrotoken, Microsoft and Sinqia presented a blockchain-based programmable financial platform that allows farmers to finance and sell crops
Vert created a similar cash programmability system for financing rural small and medium sized enterprises, with an auction system that involves settlement in Digital Real, cash or tokens.
The infrastructure provider built a liquidity pool for tokenized assets such as public securities, giving financial regulators greater control over pool participants, risk calculations and exits
Itaú’s DeFi Liquidity Pool
Perhaps the most interesting and noteworthy project from the cohort is Itaú’s DeFi-inspired liquidity pool - compatible with Digital Real. Itaú is considered the largest bank in Latin America so this is quite a significant development.
Yukiko Dias of the Itaú product team explained:
“It is a liquidity pool built on a blockchain that allows investors to contribute pairs of Real and Dollar tokens in exchange for a return, generating the necessary liquidity so that other customers can swap between these tokens almost instantly.”
Customers are able to deposit stablecoins into a special account that facilitates conversions from one crypto to another without directly connecting a buyer and seller. Liquidity providers earn yield in the form of fees paid on each transaction. The platform does however require users to go through identity verification but theoretically offers a higher level of security. The prototype was tested on both the Ethereum and Stellar blockchains.
According to Itaú, the yield generated by the model is on par with yields offered by leading DeFi platforms on the market currently. Dias told InfoMoney:
“Our goal was to assess whether we could use the structures of decentralized finance to bring some benefit to the traditional financial system, and understand whether we could build a viable business model for those customers who would like to monetize their cryptoassets.”
Itaú also presented a project enabling offline payments via Pix using a QR code. Such a development would reduce physical money in circulation and allow for greater Pix adoption in areas without internet or mobile connectivity.
LoveCrypto’s LIFT finalist project allows a user with a wallet on the Celo blockchain to buy treasury bonds registered on the Digital Real network.
Edmilson Rodrigues, CEO of LoveCrypto, commented:
“Real Digital will be magical, a new PIX moment in the Brazilian economy.”
The BC announced that the application period is open from May 2-12 for groups looking to participate in the Digital Real pilot. 10 spots are available for institutions that meet the BC’s requirements. Applications should be submitted to the email@example.com email address.
Cryptocurrency startups, however, will be left out of this specific cohort unless they join consortia with at least one institutional participant in the national financial system. The BC’s Fábio Araújo explained:
“We want to have diversity and we look forward to having participants in the crypto environment, but we know that they cannot participate alone.”
The Bank also published rules and procedures governing the Digital Real pilot and established an executive management committee to oversee its development.
The Bank’s next Digital Real focused event will be a series of workshops held on May 16 in Brasilia in conjunction with Fenasbac. More information can be found here.
🎙Recent 🇧🇷BCR Podcast episodes
If you are a service provider/operator/investor looking to enter Brazil, a Brazilian company looking to expand your presence internationally, or an exchange operating in the Brazil market - I want to interview you!
1️⃣ Bruno Ramos de Sousa, Hashdex’s head of US and Europe, joined to discuss the history of crypto ETFs and the road ahead for one of the Brazil crypto market’s crown jewels. (Spotify, Apple Podcasts)
2️⃣ Cláudio Rabin, editor-in-chief at Portal do Bitcoin, joined to help us better understand what’s happening with the ongoing probes into Binance’s derivatives offerings. Apologies the audio isn’t great on this (Spotify, Apple Podcasts)
🗞Brazil Crypto News Rundown
CriptoLoja, the Portuguese-exchange owned by 2TM, is now known as Mercado Bitcoin following a restructuring and rebranding. CriptoLoja was the first crypto exchange to receive a license from the Banco do Portugal and was acquired by 2TM in 2022. MB CEO Reinaldo Rabelo commented:
“The expansion process ends up generating a confusion of brands and services, which made us organize and use a single concept to facilitate the reading of the global market and our customers. In Portugal, in addition to the unification of the brand, we are going to expand the product offer, including more crypto assets, in addition to exploring more tokenization.” (Portal do Bitcoin)
Valor profiled crypto infrastructure provider Fireblocks’ expansion efforts in Brazil, including an expanding local team and deals with several Brazilian banks and investment platforms. The provider claims to have approximately 50 clients across Latin America.
Toncoin, a cryptocurrency linked to messaging app Telegram, fell sharply after a Brazilian court ordered the suspension of the service in Brazil. (Livecoins)
MB Tokens is launching a new batch of digital fixed income tokens backed by real estate. The launch is happening in partnership with Blackbird Co. and offers an estimated 15% annual yield. 26,814 tokens will be offered at a unit value of R$100 each. (Portal do Bitcoin)
Parfin launched a new version of its digital asset custody product, which now combines seven layers of security. (BlockNews)
Some observers are bullish on Brazil’s potential as a crypto mining hub as the country continues to invest in renewable energy infrastructure. (Livecoins)
The Blockchain SP megaconference will take place June 20-23 in São Paulo with at least 17 events inside, including Ethereum SP, SciBiz, NFTTalks. (BeinCrypto)
NFT Brasil will be held June 2-4 in Ibirapuera Park in São Paulo, bringing 100 speakers, 150 artists and 500 digital works. (Livecoins)
Alexandre Vasarhelyi, co-founder of BLP Crypto, sent 1 real worth of bitcoin to Microstrategy CEO Michael Saylor after Saylor converted his corporate email address to a bitcoin lightning address. (Livecoins)
Transfero and Código Brazuca are launching a free Web3 course, with an emphasis on teaching Solidity, to aimed at underprivileged youth. (BeinCrypto)
Mercado Bitcoin and tax consultancy Sencon released a free e-book detailing how to declare crypto assets on income tax returns. (Portal do Bitcoin)
BitSampa announced 2GO Bank as its master sponsor and made its second tranche of tickets available for purchase. The event will be held June 10-11 at the Expo Center Norte in São Paulo. (CriptoFacil)
Binance held a round of cryptocurrency workshops at five of Brazil’s top universities, including Getulio Vargas Foundation, Unicamp, University of São Paulo, Insper and Inteli. (Livecoins)
NGO Educar+ is hosting an international social impact hackathon called Hacking for Trust in the Chapadão favela with more than US$20,000 in prizes. The event is being sponsored by Polygon and 1inch Network. (Portal do Bitcoin)
Anatel president Carlos Baigorri discussed with Livecoins some of the agency’s projects that use blockchain tech to identify fake news.
A recent concurso - or entrance exam - for job vacancies at Banco do Brasil included questions about bitcoin mining and crypto markets. (Livecoins)
Brazilian investors have safety concerns when investing in cryptocurrencies, new research from Kaspersky shows. (Livecoins)
CQQD, the Campinas-based research and development center, is exploring the tokenization and custody of environmental assets in its new Green Bonds Brasil program. (BlockNews)
🎮 NFTs, Gaming and Metaverse
Sky Mavis, the developer of the Ronin blockchain and Axie Infinity game, announced a Portuguese language translation of the game as well as a new country lead - Abner Nascimento, known has “Tonhaca” in the Axie Latam community. (BeinCrypto)
A new Web3 explainer book will be released in NFT format, with proceeds going to charities in Rio de Janeiro. (Exame)
A group of Brazilian developers launched a test of an NFT-based football game called Olefoot. (Exame)
The city of São Paulo canceled its Virada Cultural event in the metaverse as estimated costs approached R$10 million (US$2 million). The event will now be held in its previous, real-life format on May 27-28. Deputy Erika Hilton was one of the lead opponents of the metaverse project. (Exame)
🏛 Public Policy, Regulation and Enforcement
Despite counter-arguments by asset tokenizers, the CVM declined to waive registration requirements for fixed-income tokens and indicated that the licensing procedure for these should take about three months. Bruno Gomes, superintendent of securitization supervision at the CVM, told InfoMoney:
“We are working with a horizon of perhaps one month to receive the registration requests, and three months to grant the registrations…we hope that within six months we will have everything defined and the tokenizers running.”
Popular crypto Twitter sleuth ZachXBT accused the Nazaré Amarga Twitter account of a R$550,000 rug pull. The account has 4.7 million followers on Twitter and 9.5 million on Instagram. ZachXBT accused Gabriel Marques, the person behind the account, of convincing 20 members of the “Nakamigos” NFT community to invest funds in a supposed presale of a memecoin called MATH. (Portal do Bitcoin) (Livecoins) (Crypto Times)
A court in the US ordered Johann Steynberg, a South African businessman and CEO of Mirror Trading International who is currently detained in Brazil, to pay a US$3.4 billion (R$17 billion) fine for operating an illegal bitcoin investment scheme.
The penalty is the largest civil fine ever imposed by the Commodity Futures Trading Commission.
Half of the sum will go toward to users as restitution and half comes as a civil penalty.
Steynberg obtained almost 30,000 bitcoins between 2018 and 2021 from at least 23,000 investors from the US and abroad
The Brazilian Supremo Tribunal Federal ordered his preventative arrest in 2021. He had been hiding in Brazil since December 2020, but it took authorities a year to identify his exact location before arresting him in Goiânia in December 2021. (Portal do Bitcoin) (InfoMoney) (Valor Investe)
Laurent Myriam Claude Barthelemy, a Belgian national accused of running a cryptocurrency pyramid scheme, was arrested in Fortaleza. (Portal do Bitcoin)
The Public Ministry of the Federal District and Territories filed a lawsuit against two hackers who invaded the Bank of Brasilia servers and demanded a ransom of 50 bitcoins last October. The suspects were arrested in São Paulo in January. (Portal do Bitcoin)
The National Council of the Public Ministry (CNMP) presented new proposed rules for the seizure, custody and liquidation of cryptocurrencies. (Livecoins)
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