🇧🇷BCR #94: Decree formalizing crypto law expected this week
🇧🇷BCR #94: Decree formalizing crypto law expected this week
Plus: Campos Neto talks crypto, Digital Real at Valor Capital event; Netherlands' Queen Maxima visits Brazil to learn about Pix, Digital Real
🔥 Quick shout out to our partners at the BlockchainSP Festival. The festival, comprised of 14 concurrent events, will take place at the University of São Paulo and bring together crypto and TradFi professionals, students, hackers and investors from all walks. Please head over to blockchainfestival.io/sao-paulo to learn more
Olá pessoal!
Welcome to 🇧🇷Brazil Crypto Report for the week of May 29-June 2, 2023!
Friendly heads up that I’ll be attending and speaking at the Criptorama event in Brasilia this week June 6-7. Many thanks to the ABCripto team for the invitation (register here).
Word on the street is that the formal decree from the executive branch to designate the Central Bank as the crypto market regulator in Brazil will be signed around the time of the event. This decree will officially kick off the rulemaking process for a regulatory regime for the cryptoeconomy in Brazil.
Recall that the enabling legislation was passed and signed into law last December, but implementation has been delayed due to the presidential transition. A preliminary draft of the decree was circulated in March, and ABCripto and partner groups have been lobbying for it to be formalized since then. If no decree is issued by the Lula administration, the law will come into force June 20th with limited provisions.
I hope to see some of you there. Have a great week everyone.
-AWS
Campos Neto speaks on crypto and Digital Real at Valor Capital event
Brazil Central Bank president Roberto Campos Neto spoke again about his vision for cryptocurrencies and the Digital Real at an event hosted by Valor Capital. He stressed that the platform will expand well beyond just payments and will serve as the foundation for an open, DLT-based financial system capable of running smart contracts and interoperating with other financial systems around the world. He said:
“Talking to other central banks, the debate around digital currencies is very focused on payments. In our case it goes far beyond payments.”
"People say [our] payments system works well, but it works well for what we have today. Our job is to design the system today for the financial world of tomorrow. I think there's a movement toward tokenization that's not going to reverse."
He continued to highlight benefits of digital intermediation and a tokenized financial system - including greater risk control and lower costs for banks in such an economy.
A few other highlights from his talk:
He spoke highly of bitcoin, Ethereum and Solana and stressed the need to bring the decentralized finance ecosystem closer to the Digital Real environment rather than pushing it away:
“The more you want to regulate, the more you lose control over what needs to be regulated…We already have the technology to link several distributed systems, such as Hyperledger. Our biggest goal now is to connect all the systems we have available.”
There exists a problem of “misinformation” surrounding crypto assets among global financial elites that is being used to block innovation.
“It was an interesting conversation on the [Bank for International Settlements] board. Some people said '[crypto] is very bad because people are losing money.’”
"I think there's a lot of misinformation in this and it's very easy to use misinformation to go against innovation. And because people lose money - they lose money on different things, but they lose on this too - there's a bad reputation.”
The Digital Real is not intended to compete with or do away with cryptocurrencies and private stablecoins but rather to complement them. He said:
“When we have this environment, people will be able to enter their digital wallets – with CBDCs and cryptos – and will be able to transfer and buy cryptos with the digital currency, and choose which of these instruments to use in their smart contracts”
Campos Neto said central banks globally must focus on connecting payment systems - citing that a “great advance” has been made in this area over the last 12 months but much work remains. He also reiterated his belief that central banks who are not thinking about an open and programmable financial system will be left behind:
“I find it very hard to believe that someone would invest a lot of money in a system that is not programmable, because it will be left out of the mainstream. DeFi and all technological innovation”.
Both Campos Neto and Fábio Araújo, director of the Digital Real project at the Central Bank, stressed that the critical challenge is providing greater automation and efficiencies while ensuring adequate data protection and privacy:
"We have a challenge: how to do this efficiently and at the same time protect data? It is one of the questions that still needs answers….We can advance in automating things and become more efficient, but in centralized systems you can better protect data. Fábio [Araújo] is working on different models to make sure that we are going to have that"
He spoke out against the idea of common currencies, particularly the one between Brazil and Argentina proposed by Lula earlier this year. “I’ve always been against it”, he said.
Campos Neto also provided an update on ongoing efforts to internationalize Pix, noting that it is already possible to use Pix in Orlando in Uruguay.
Portal do Bitcoin CNN Brasil Valor Valor
Tether CTO Paolo Ardoino defends USDT against tax evasion allegations
Ardoino defended USDT, the most popular stablecoin in Brazil and the world, against charges that it enables tax evasion and other crimes, in an exclusive interview with InfoMoney’s Paulo Alves, while conceding that tax evasion does in fact occur using the coin. He said:
“Tax evasion is not a problem that started with Bitcoin, it's not a problem that started with stablecoins. It is a problem that is also ours, people are evading taxes. It is not technology that commits tax evasion. When people decide to engage in illicit activities, it's not technology's fault, it's people's fault."
The use of cryptocurrencies to evade taxes, particularly the conversion of reais to dollars via stablecoins, is currently an area of concern for the Central Bank.
Further, Ardoino argued that using USDT to commit illicit activity is ill-advised due to the visible and immutable nature of the underlying blockchains on which the token lives:
“It is important to remember that Tether is a centralized stablecoin using decentralized transport layers. These transport layers are the blockchains and blockchains are transparent. Everything is recorded on blockchains and recorded for eternity.”
The interview was part of an InfoMoney series examining the use of crypto by Brazilian investors to evade taxes, particularly in light of a new proposed measure regarding taxation on income earned abroad. The piece argues that these rules can be easily circumvented by high-income investors using cryptocurrencies such as US dollar-pegged stablecoins.
One investor with approximately R$8 million invested in crypto overseas, said:
“If I am obliged to pay tax every year, I can simply bring crypto to Brazil…In crypto, everything is possible, there are people who move millions within the country and do not pay a penny of tax. Or pay as little as possible.”
Mercado Bitcoin receives payments license from BC
The exchange is now able to operate as a payments institution as an electronic money issuer, meaning it can offer new types of payment services such as credit cards and no fee payment accounts through MB Pay - its payments and digital banking product. 2TM CEO Roberto Dagnoni said in a statement:
"The central bank's approval is an important step, as it allows us to continue with our business expansion plans to offer an even more complete experience to our customers."
CoinDesk Exame Reuters Valor (Portal do Bitcoin)
🎙New podcast with TC Cripto’s Jorge Souto and Paulo Boghosian
I sat down with Jorge and Paulo to learn more about Traders Club and TC Cripto. We talked macro, trading strategies and Brazilian investor and trader profiles. Have a listen on YouTube below or on Spotify, Apple Podcasts or Google Podcasts
🗞Brazil Crypto News Rundown
📈 Markets
Guide Investimentos will offer bitcoin and Ethereum starting June 25 through a partnership with Mercado Bitcoin, and may introduce other assets like fixed-income tokens and NFTs in the future. Guide is owned by the Chinese group Fosun and has one of the largest networks of investment consultants and wealth managers in the country - some 400 distributors spread across 42 cities in Brazil. Guide’s Felipe Steinfeld commented:
“These assets have become a new class of investments. So it makes sense as portfolio diversification. The idea is to guide the client so that he can safely diversify using these assets either with investments on his own or with the help of an investment advisor.” (Valor) (CoinTelegraph Brasil)
Rico, a brand of XP, began offering crypto assets to its customers through a partnership with Xtage (XP’s crypto brokerage). The platform offers bitcoin, Ethereum, Chainlink, Polygon, Solana, Cardano and Litecoin with a minimum investment of R$60 (US$12). The launch comes in light of a customer survey that found 56% would be highly interested in the product. Pedro Canellas, director of Rico, said in a statement:
“By offering crypto, we expand access to this type of asset and strengthen our relationship with users.” (Valor) (InfoMoney) (Portal do Bitcoin) (CoinTelegraph Brasil)
BRZ, the real-pegged stablecoin issued by Transfero, was traded more than one million times in March with an average transaction size of R$234, according to Receita Federal data. It was the most traded crypto in the Brazil market after bitcoin, followed by Ethereum and Polygon. (Valor)
Bitcoin appreciated more than any other mainstream asset available to Brazil investors over the last 10 years, according to a report by Hashdex and Quantum. Bitcoin rose 7,880 % during the period, surpassing the S&P 500 index - which grew by 381%, the IMA-B index (which tracks securities linked to Brazil inflation), the hedge fund index maintained by Anbima, and more. Hashdex CIO Samir Kerbage said in a statement:
“This study positively reinforces our long-term investment thesis in crypto assets. We are talking about a technology with the potential to transform the global financial scenario.” (Valor)
SMU issued a R$500,000 commercial note token for Grupo Muda, a waste logistics company, inside the CVM regulatory sandbox. The tokens will provide a return of 2.25% per month, with a minimum investment of BRL 1,000, and will be listed on SMU’s trading platform. (Valor) (InfoMoney)
Fintech Laqus also issued a digital receivables token valued at R$5 million for an undisclosed internet of things company. The issuance was carried out in partnership with AmFi. (Valor)
Crypto infrastructure firm Paxos says it has witnessed increased demand for its products in Brazil over the last 18 months. Michael Coscetta, the firms’ director of revenue, told Livecoins:
“We see a strong push in Brazil from large companies looking to provide cryptocurrencies, stablecoins and gold to their customers. More than ever, these companies are looking to work exclusively with regulated and insured partners. Adoption is only likely to accelerate given Brazil's push for regulatory transparency. We believe it will only be a matter of time before cryptocurrency is seen as an essential component in any portfolio.”
Gustavo Cunha wrote a good column for InfoMoney arguing that tokenization of real-world assets is where the worlds of crypto and traditional finance converge
Holders of the Cruzeiro token (CRZO) will receive US$159,000 in total payouts for the sale of Ederson from Salernitana to Atalanta - both Italian clubs. Investors who hold the token in their Bitybank, BityPreço or Liqi wallets will automatically participate in the distribution. (CoinTelegraph Brasil)
📱Adoption + Digital Real
Jose Bernardes and Dan Yamamura of Fuse Capital wrote a nice op-ed for Blockworks calling attention to Brazil’s crypto scene
SmartPay launched its Truther app that enables conversions between USDT and BRL. The app comes with Swapix integrated and facilitates payments at any establishment that accepts Pix. (CoinTimes)
The Central Bank released a report highlighting the advantages and risks of a tokenized financial system. Expected benefits include greater programability and automation, atomic settlement that reduces counterparty risk, breakdown of information silos via DLT and the ability to register assets in a shared environment.
However, the report notes that there is no fiat currency compatible currently with such an environment. This requires the use of private stablecoins that “are not subject to adequate regulation”.
"In the absence of an infrastructure that operates natively with the Central Bank's currency in digital format, these transactions are exposed to private risks, which can compromise financial stability… Therefore, the Central Bank advocates the creation of a regulated infrastructure compatible with the tokenized economy” (Exame) (Valor)
James Wallis, vice president overseeing CBDCs at Ripple, argued in an interview with Exame that Digital Real and other CBDCs will not replace alternative forms of money. He also held up Brazil as a global leader in digital financial infrastructure:
"There are many different use cases. If you look around the world, you see instant payments, tokenization, it's a long list. I see that in Brazil, it is an example of what you can achieve in digitalization, the rest of the world recognizes this.”
Bradesco’s innovation lead George Marcel Smetana argued that the Central Bank should issue a neutral standard for tokenization of financial assets so as to not impede innovation. The bank has yet to issue a formal rule on the subject. (InfoMoney)
Febraban, a trade association representing Brazil’s largest banks, announced the creation of a 20 member technical working group to assist with Digital Real development. The group dos not plan to run a node on the network but rather aims to promote "technical debate on security, privacy, resilience, interoperability and scalability of digital currency" among banks and encourage"the exchange between institutions of evaluations on the future of this initiative". (Exame) (Valor)
Former Central Bank president Gustavo Franco will participate in a Digital Real themed event at University of São Paulo on June 14.
Colb, the smart contract company co-founded and chaired by Brazilian Yulgan Lira, launch Switzerland's first regulated stablecoin - the US Stablecolb (SCB). (Valor)
An apartment in Copacabana was sold for R$1.55 million to a French national with 30% of the transaction being paid with USDT. (Valor)
The EthereumSP hackathon, part of the BlockchainSP festival, will feature Blockdeaf, a community devoted to helping the deaf community learn about Web3. (BeinCrypto)
The LIFT Lab, operated by the Central Bank and Fenasbac, was chosen as one of the best innovation labs in the world by Global Finance Magazine. (BlockNews)
Samsung made its Galaxy Book3 notebook computers available in Brazil. The computers use a blockchain-based data protection system to increase user privacy. (Exame)
MoonPay CEO Ivan Soto-Wright reportedly used a chunk of his Series A funding to buy a multi-million dollar mansion while firm has fallen on hard times in the bear market. MoonPay is a sponsor of the Flamengo football club. (Livecoins)
The National Agency for Water and Basic Sanitation is seeking blockchain and other digital solutions to reduce plastic in rivers and lakes. (CoinTelegraph Brasil) (Portal do Bitcoin)
The city of Rolante in Rio Grande do Sul is becoming a bitcoin adoption hub in Brazil with at least 108 establishments accepting bitcoin as payment. (CriptoFacil)
A new study out of the Polytechnic School of the University of São Paulo proposes using blockchain technology to track hospital medications. (CoinTelegraph Brasil)
Brazilian startup H3aven developed an NFT solution for Netflix user credentials that would prevent subscribers from sharing with people outside of their household. (CoinTelegraph Brasil)
🎮 NFTs, Gaming and Metaverse
Lumx Studios and Upland are teaming up to launch the headquarters of Brazilian e-Sports group Los Grandes in the Upland metaverse. (CoinTelegraph Brasil)
NFT.Brasil, which took place in São Paulo over the weekend, exclusive “phygital” featured an exposition of over 30,000 unique NFTs related to late American basketball player Kobe Bryant. The event also featured skateboarder turned NFT enthusiast Bob Burnquist and actor Bruno Gagliasso. (CoinTelegraph Brasil) (BeinCrypto) (Exame) (Portal do Bitcoin)
Burnquist discussed how he got involved in NFTs and crypto in an interview with Crypto Times
Queen Maxima of the Netherlands will visit Brazil this week to learn about Pix, Digital Real and other digitization initiatives happening in the country. She will meet with Roberto Campos Neto and other technocrats at the Central Bank, as well as other public and private sector leaders. (CoinTelegraph Brasil)
Binance and the Brazilian Football Confederation (CBF) launched their Fanverse, which provides exclusive experiences to holders of the Brasileirão Season Pass NFT. (BeinCrypto) (Blocknews) (CoinTelegraph Brasil)
🏛 Policy, Regulation and Enforcement
A group of asset tokenizers including Liqi and Mercado Bitcoin approached the CVM to discuss the creation of a single standard blockchain for asset tokens issued in Brazil.
This network would be monitored by the CVM, making the regulator’s job less complex, as well as the compliance hurdles faced by issuers.
Other token issuers argue that it would be better to use an existing public chain rather than creating a new one specific to this problem
The CVM told Valor that it is “attentive” to the concept.
Liqi CEO Daniel Coquieri argued:
“If you create 20 blockchains, each tokenizing in its own way, that becomes a problem. Capital markets need a standard permissioned blockchain for assets to be tokenized.” (CoinTelegraph Brasil)
Mercado Bitcoin has formed an advisory board to assist with strategic and regulatory matters. The board is modeled after the structure created by Binance and brings in former Febraban president Murilo Portugal, Banco ABC chairman Tito da Silva Neto, ParMais founder Annalisa Blando, former CVM director Henrique Machado, Nicole Dyskant and more. (Valor) (BlockNews) (Portal do Bitcoin)
The Justice of São Paulo ordered the restitution of 2182 bitcoins (roughly R$300 million) to four individuals who filed suit against Mercado Bitcoin and a fund called Bitcoin Rain
Leandro Marciano Cesar started the Bitcoin Rain fund in 2011 with promises of 10% monthly returns
The fund disappeared in 2013 when Marciano claimed to have been hacked and lost the invested bitcoins
He operated the fund using personal accounts on exchanges like Mt Gox, BTC-e and Mercado Bitcoin, and even owned the mercadobitcoin.com.br domain name for a period. Plaintiffs argue that Marciano used Mercado Bitcoin to transfer assets transacted by Marciano and therefore it is culpable
Mercado Bitcoin says it will appeal the decision, arguing that it did not exist as an exchange when the losses occurred and that there was no regular accounting of the debts accrued (Portal do Bitcoin) (CoinTelegraph Brasil) (InfoMoney)
An investor from Paraná found a security flaw in the Binance platform when her account was accessed by an unrecognized device with an IP address originating in Pernambuco. In late 2021, the hacker bypassed the platform's required authentication and drained her account. Following an investigation, a court-appointed cybersecurity expert confirmed the unauthorized access and the security failure on Binance's platform. (Livecoins)
The “miracle robot” used by Atlas Quantum will be a key focus of the new Parliamentary Commission of Inquiry examining crypto pyramid schemes in the country. The commission’s first meeting is scheduled for this coming week. (InfoMoney) (Livecoins)
The Receita Federal will make changes to Normative Instruction 1.888 later this year to align Brazil with crypto tax reporting standards promoted by international bodies like OECD. (BlockNews) (Exame) (CoinTelegraph Brasil)
Brazilian television actors associated with the SBT network have been enlisted to advertise Versobot, a platform promising automatic returns to investors by leveraging a purported arbitrage bot that claims to generate 2% daily returns. Aldo Toledo, the mastermind behind Versobot, is known for his involvement in several notorious pyramid schemes, including OneCoin, a global crypto scam that led to an FBI investigation. (Portal do Bitcoin)
Senator Augusta Brita from the Partido dos Trabalhadores is requesting that the Parliamentary Commission of Inquiry that is being set up to investigate the January 8 capitol riots examine potential use of cryptocurrency by alleged suspects. (Livecoins) (Valor)
Civil Police in the Federal District arrested two men accused of targeting Brazilian investors through an elaborate forex and cryptocurrency investment scam. The arrests were carried out in Lisbon, Portugal. (Portal do Bitcoin)
The São Paulo Court of Justice ordered “Bitcoin Sheik” Francisley Valdevino da Silva to pay R$17.7 million to a victim of the Rental Coins pyramid scheme. The Sheik is currently in jail after being arrested last November. (Crypto Times) (Portal do Bitcoin)