🇧🇷BCR #92: Digital Real Fever Pitch

Plus: Vitalik gives Brazil a shout out in cryptic blog post; ex-Braiscompany employee speaks out;

Olá pessoal!

Happy Bitcoin Pizza Day and welcome to 🇧🇷Brazil Crypto Report for the week of May 15-19, 2023!

Big week on the Digital Real front as the Central Bank and Fenasbac hosted a workshop in Brasilia featuring presentations from academics, builders and technologists who submitted papers on CBDC design concepts. The workshop came as the bank commences the testing period on its Digital Real pilot and ramps up its engagement with private sector partners.

A total of 34 entities (individual companies and consortia) applied to participate in its Digital Real pilot, according to Valor. There are currently 10 vacancies to the program, though this number is expected to expand to as many as 15 or 20. Many of the country’s largest banks, credit unions, fintechs, card brands and technology providers have either submitted proposals or expressed interest - including large banks like Bradesco, Itaú, Banco do Brasil and credit union cooperatives Sicoob and Sicredi.

Even several smaller institutions like Caixa, Banco de Brasilia and Banco da Amazonia expressed interest despite not showing much interest in digital assets previously. The broad mix of applicants has been well-received by the bank. “We want diversity of visions and opinions in the group,” Fabio Araújo, lead of the Digital Real project, told Valor.

Here’s a rundown of some key takeaways from the workshop and pilot submissions:

• Microsoft presented a technology that would create a bridge between the Digital Real and external public blockchain networks like Ethereum. The objective is to make the Digital Real “agnostic” so that it can work in any environment - whether the official Central Bank network or external public networks. (InfoMoney)

• Asset tokenizer Liqi also applied to participate in the Digital Real pilot with a proposal to tokenize public bonds. It entered into a consortium with two other companies with the goal of bringing security and reducing the complexity of the tokenization market. CEO Daniel Coquieri argued that a reliable tokenized currency backed by the Central Bank is the missing piece to the crypto universe:

“The digital real, no matter if it is its CBDC [digital currency issued by the central bank] wholesale version or the one that will be distributed by banks backed by tokenized deposits, can scale the current structures offering greater security to the market.”

• Mercado Bitcoin applied via a consortium with Mastercard, Cerc and Sinqia to test tokenized currency - both retail and wholesale - and treasury bonds. CEO Reinaldo Rabelo said in a statement:

“The consortium addresses the three aspects given the diversity of the partners, with a focus on testing the items prioritized by Bacen for this stage, such as interoperability, privacy and network security.” (Valor)

• Brazilian blockchain project Hathor presented a project that would allow regulators to access tokens held by consumers via a multi-signature architecture. (Valor)

• Valor Capital Group had a helpful write up summarizing key takeaways from the event and its general views on the Digital Real development process.

I’ll be covering these topics in more depth in the coming weeks and months as I continue to believe the Digital Real is the most interesting development in digital finance this year. In the meantime, here a few photos I grabbed at the event.

Have a great week everyone

-AWS

🥳 Vitalik gives Brazil a cryptic shout out in governance blog post

Vitalik referenced Brazil in a hypothetical sci-fi scenario for a May 21 blog post entitled “Don’t Overload Ethereum’s Consensus”, in which a 2034 political crisis and disputed election in Brazil prompts a fork of Brazil’s CBDC.

Hopefully next time Vitalik talks about Brazil the context will be more flattering 😂

Brazil’s crypto law to take effect June 20

The Marco Cripto, signed into law last December, will officially take effect on June 20. The law automatically takes effect 180 days after passage.

According to Valor, the components of the law that do not require specific regulation from the supervising regulator - expected to be the Central Bank - will come into full force. However, certain criteria that still need to be ironed out by the Central Bank - such as the VASP licensing regime - will not take effect immediately.

Importantly, there are questions about how this impacts foreign exchanges operating in the country without domicile. The law provides exchanges that are already operating in the country with six months to come into compliance. Exchanges that were not previously operating in Brazil will need to wait until the registration rules are published.

Renata Cardoso, an attorney with Lafosse, told Valor:

"This means that providers of virtual asset services that are not operating in Brazil at the time the law is in force, once the law comes into force, will not be able to provide such services until they obtain authorization from the regulatory authority"

Former Braiscompany employee speaks out

Ismael Lira, formerly employed by Braiscompany as a security guard and a chaufer, detailed to Portal do Bitcoin how company founders Antonio Neto Eis and Fabricia Campos planned their escape from the country once the company’s operations became unsustainable - selling assets well in advance before disappearing in February. The couple is rumored to be hiding out in Buenos Aires.

Lira, who served as a private driver for both Neto and Campos, said he finally understood the true nature of the pyramid scheme while witnessing the hurried fire sale before the enterprise collapsed and realizing that he would be among the investors who wouldn’t be getting their money back.

Braiscompany is currently being investigated by Brazil’s Federal Public Ministry, with a focus on the whereabouts of the founders and the disappearance of R$2 billion (US$400 million) in investor funds.

Lira also discussed Braiscompany’s reckless pursuit of new clients and the founders’ impressive ability to fool even sophisticated investors. He stated:

“They managed to fool pretty much everybody. They didn't choose social class, nor did they spare those who were terminally ill, starving... they took over the house, they took everything. Campina Grande is currently experiencing a financial collapse”

Lira added that he is personally in great financial distress as a result of the company’s collapse, and says that he has been on the receiving end of threats from his former bosses due his former proximity to them.

“I'm getting a lot of death threats, saying they're going to kill me — that they know where I live.”

🚨The Public Ministry of Paraíba also filed a civil action against Braiscompany last Thursday, May 18. The petition asks for restitution of damages to clients plus a 30% fine and R$20 million (US$4 million) in moral damages. The total damages to investors is estimated at R$258 million (US$51 million). (InfoMoney)

👮‍♂️ Braiscompany was also the target of another operation by Federal Police on May 18, the third of its kind this year. Search and seizure warrants were executed in São Paulo in an operation called Select II.

🤦‍♂️ Flavia Farias Campos, the sister of Fabricia Campos, has filed a lawsuit against her sister and Antonio Neto Eis arguing she was a victim of the company’s collapse and aiming to collect R$232,000.

Brazilian Congress approves a commission to investigate crypto pyramid schemes

Arthur Lira, speaker of Brazil’s Chamber of Deputies, approved a proposal to create a Parliamentary Commission of Inquiry (CPI) to investigate pyramid schemes involving cryptocurrencies.

The CPI will collect information on 11 companies and individuals who have carried out such schemes, including Atlas Quantum, TraderGroup and Zero10 Club, and have had been issued stop orders by the CVM - Brazil’s securities regulator.

The proposal to create the CPI was introduced by Deputy Aureo Ribeiro, the main protagonist behind the crypto legislation that was signed into law last December. Ultimately, the proposal earned the support of 171 deputies in the Chamber.

The CPI will have a term of 120 days, which will be extendable for up to 60 more days. It will be comprised of 32 members and 32 alternates, nominated by political party leaders. The commission will have the powers of investigation similar to judicial authorities - the ability to summon authorities, request documents, etc. An official creation date has not been scheduled.

🎙New podcast with Fortune’s Leo Schwartz

Fortune crypto reporter Leo Schwartz joined the podcast to talk about his experience at Web Summit Rio and his impressions of the Brazil crypto ecosystem and regulatory outlook. Have a look on YouTube below or listen on Spotify or Apple Podcasts 👊

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🗞Brazil Crypto News Rundown

📈 Markets

• Latam Gateway, the fiat on-ramp used by Binance in Brazil, received a payment institution license from the Brazil Central Bank.

  • The license gives the company the ability to issue electronic money and offer products such as prepaid accounts.

  • Binance began using Latam Gateway as a payment processor last summer after it terminated its relationship with Capitual

  • Other crypto exchanges in the country like Bitso and Crypto.com have also obtained the license, while Mercado Bitcoin and Ripio have submitted applications. (InfoMoney) (Crypto Times)

• AmFi is bringing Brazilian tokenized debt products to foreign investors through lending pools, with the expectation of garnering R$500 million (US$100 million) this year from family offices, treasuries and other asset managers. (Valor)

• Nubank co-founder Cris Junqueira spoke about the surging demand for cryptocurrencies from Brazilian customers at a company event in São Paulo. Nucripto platform has 1.4 million active customers, the executive said:

“We see a lot of demand. It's really crazy that in Brazil we have a lot more people investing in cryptocurrency than in the stock exchange. So it's something that the public is very interested in. And we think this way: where our customer has demand, we are here to meet it.”

“It was crazy. In the first month that we launched crypto, we already had more than one million customers buying crypto on our platform. Today it is already one of the largest [cryptocurrency marketplaces] on the market.” (Portal do bitcoin)

• BEE4, a Brazilian platform for trading tokenized shares of companies, announced a partnership with US-based tech provider Connamara. BEE4 will use Connamara’s EP3 platform to help scale its business. CEO Patricia Stille said in a statement:

“The EP3 offers a matching engine tool, which will be used in the process of matching buy and sell orders, allowing BEE4 to efficiently scale our market.” (Valor)

• QR Asset Management announced the incorporation of the Impetus cryptocurrency fund, previously managed by Vortx. The fund will be rebranded as QR Crypto Impetus Fim IE. The company said in a statement:

“The QR CRYPTO IMPETUS FIM IE is mainly aimed at family offices and HNWI, and does not follow the obligation to always be 100% long.” (Portal do Bitcoin)

📱Adoption

• Brazilian crypto YouTuber Edilson Osório Jr, aka EddieOz, had his channel deleted by YouTube on May 13, resulting in the loss of 1200 hours of content. The channel was shortly thereafter reinstated with an apology. (Portal do Bitcoin)

• Bitcoin payments app Strike announced that it is now available in 65 new countries, including Brazil. The app, made popular via its involvement in El Salvador and its charismatic young founder Jack Mallers, offers instant payments through the Lightning Network. Strike previously operated only in the US, El Salvador and Argentina. (Portal do Bitcoin)

• ABCripto is bringing its Criptorama event to Brasilia on June 6 and 7. CEO Bernardo Srur said in a statement:

“In June we will have the legal framework for crypto assets in force, and Cryptorama is a great opportunity for us to exchange experiences and trends in good practices and regulation, which further strengthen the crypto economy in Brazil. Criptorama Brasilia will be the great meeting point between the stakeholders responsible for discussing these topics”.

• Anatel, Brazil’s national communications agency, plans to test a new system that uses blockchain to identify disinformation during next year’s municipal elections. The project is being developed in partnership with the Federal University of Goias. (InfoMoney)

• InfoMoney reports that the nephew of former FIFA president Sepp Blatter was the intermediary who negotiated the deal behind the Brazilian Football Confederation’s failed fan token project. Infront, a sports marketing company chaired by Philippe Blatter that is a part of China’s Dalian Wanda conglomerate, brokered the agreement between the CBF and the relatively unknown Turkish exchange Bitci.

• Petrobras, Brazil's largest state-owned company, is conducting a crypto innovation marathon for its employees for the second consecutive year. 80 Petrobras employees are expected to participate. (BeinCrypto)

• The city of Rio de Janeiro announced plans for the country's first public 'Gamer Arena' as initiative comes as part of the city's investment into Web3 and crypto-assets. The facility will be set up inside the Nave do Conhecimento in Engenhão, in the northern zone of the city, and will have a capacity for 100 people. (BeinCrypto)

• Estonian crypto payments and custody firm CoinsPaid says it’s keeping a close eye on regulatory advancements in the Brazil market and plans to open an office in the country soon, according to manager for Latam Estefano Debernardi. (CoinTelegraph Brasil)

• Binance Academy hosted a Web3 workshop at Universidade Vida Velha in Espirito Santo for more than 500 students. Guilherme Nazar, managing director for Brazil, stated:

“Binance believes that education about blockchain and cryptocurrencies is essential for the sustainable growth of this industry in Brazil and in the world as it contributes to more informed decision making, and therefore one of the pillars of our strategy." (CoinTelegraph Brasil)

• Payment processor Münzen announced that is working on a future on-ramp and integration to offer crypto services in Brazil. It views Brazil as the main market in Latam and the entry point to the rest of the region. (CoinTelegraph Brasil)

• PretaHub, a Brazilian center for art, trends, and black entrepreneurship, has partnered with Deboo, a developer of Web3 projects and solutions, to provide training and opportunities for black entrepreneurs in the field. (BlockNews)

• Car dealership chain Osten Group sold its first Tesla in bitcoin for 11.5 BTC. The chain began accepting crypto payments earlier this month. (CoinTelegraph Brasil)

🎮 NFTs, Gaming and Metaverse

• Venture capital firm Viden Ventures invested R$1 million Danish Web3 gaming startup Bright Star Studios to develop an NFT game called Ember Sword. Other investors in the round include Animoca Brands, Coinbase Ventures and Gary Vaynerchuk. (Valor)

• Lumx Studios launched its Sello platform with the aim of connecting large brands with customers in a “Web 2.5” context. (CoinTelegraph Brasil)

• Senna Brands, founded by the late Brazilian Formula One racer Ayrton Senna, launched a re-branding campaign using artificial intelligence and NFTs. (CoinTelegraph Brasil)

• Gotas.Social, a platform that allows content creators to connect more interactively with their followers, has gained rapid popularity among Brazilian content creators in just three months. With over 16,000 wallets created or connected on the platform and nearly 100,000 "drops" minted in 90 days, the revenue has already exceeded R$85,000 with about 6,500 "drops" traded. (BeinCrypto)

• Brazilian auto racing icons will now have “phygital” versions represented in the Upland metaverse. Four million Upland users can purchase NFTs of the cars and participate in virtual races. (BeinCrypto)

🏛 Public Policy, Regulation and Enforcement

• The Federal Public Ministry of Brazil is accepting submissions for scientific papers on the "judicial-criminal aspects of crypto-assets". The initiative aims to compile a collection of articles on the legal aspects of cryptocurrencies to be published on the MPF portal. The submission window closes Friday, May 26th. (Portal do Bitcoin)

• The Court of Justice of São Paulo suspended a decision issued last week that would have allowed Binance to withdraw R$430 million (US$86 million) from accounts on Capitual, a payment processor that the exchange had used until last summer. The funds have been held in a court account since last July. (Valor) (Portal do Bitcoin)

• Civil Police in Parana arrested a man accused of hacking a cell phone and stealing R$42,000 in cryptocurrencies. (Portal do Bitcoin)

• A social media influencer known as "Vovô Rico" was the target of a Federal Police operation in São Paulo regarding accusations that he was involved in selling unregulated investment robots and conducting unauthorized foreign exchange transactions. (Livecoins)

• Italian tourist and cryptocurrency businessman Marco Nastasi drowned at Barra da Tijuca beach in Rio de Janeiro. Nastasi was the CEO and co-founder of Ennedi Investment, with operations in Colombia and El Salvador. (Livecoins)

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