🇧🇷BCR #95: Ribeiro, congressional committee look to summon CZ and Binance

Plus: Senators push for asset segregation at Criptorama; 2 million Brazilians traded crypto in April

Jun 12, 2023

🔥 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.

The team announced this past week that former Central Bank President and current Binance advisor Henrique Meirelles will be the keynote speaker. Head over to blockchainfestival.io/sao-paulo to learn more

Olá pessoal!

Well that was a pretty rough week as you all know by now. I’m spinning up a couple of podcast interviews for next week with some guests who will help us break down the SEC’s lawsuits against Binance and Coinbase and understand what this all means for crypto markets for Brazil specifically.

In the meantime, Saori Honorato at Portal do Bitcoin interviewed several experts in the Brazil market from Hashdex, Coinext and Viden Ventures about key implications for the Brazil market.

Back home on the Brazil front, we were hoping for a decree from the Lula Administration formalizing the crypto law which was passed and signed last December. We didn’t get one unfortunately, apparently due to competing priorities within the administration.

The law will go partially into effect June 20th if no decree is issued before then. If you want to go deeper, Bitso head of public policy Karen Duque spoke to Exame about how the absence of a decree is throttling the formation of a regulatory regime.

With that, I’d like to welcome you to 🇧🇷Brazil Crypto Report for the week of June 5-9, 2023!

-AWS

Record two million Brazilian investors traded crypto in April

1.9 million individual citizens and 65,600 unique companies reported crypto trades during the month of April, per data from the Receita Federal - Brazil’s tax authority. These figures are up 23.8% and 6.5% respectively month-over-month.

Total trading volume declared to the agency for the month was R$19.6 billion (US$4.2 billion), the highest number in two years.

R$4.5 billion (US$922 million) in overseas trading volume was reported for the month as well, the largest figure ever recorded, while volumes on national exchanges fell by R$1.5 billion (US$307 milllion) month-over-month.

(CoinTelegraph Brasil)

Deputy Aureo Ribeiro says congressional committee will investigate Binance and CZ

Ribeiro said at the ABCripto event in Brasilia last week that he intends to summon Changpeng Zhao and Binance for the special Parliamentary Commission of Inquiry that will examine cryptocurrency pyramids.

He said he wants the exchange to open its books and show its financial health to the committee. He even indicated that he might even request banking and telephone records from people close to CZ:

“We want to clarify everything that is being discussed. It is a company that operates in Brazil and we need to know how its financial health is. We don't want to be surprised as happened with other American companies like FTX.”
“Breach of telematic, telephone, financial secrecy, and everything else. These are the prerogatives that a CPI has. The CPI has the advantage that it is not an invitation, it is a summons.”

However, the CPI itself does not have authority to punish CZ, Binance or any other investigated entity, though it does have broad investigative powers.

The Chamber of Deputies suspended the launch of the committee due to a shortened holiday week. The CPI is expected to be formalized next week and will look into high profile crypto pyramids like Atlas Quantum, Braiscompany and Trader Group (InfoMoney ran an expose on Trader Group, a R$33 million Espirito Santo based pyramid that promised 9-15% monthly returns)

(CoinTelegraph Brasil) (InfoMoney) (Valor)

Senators highlight need for asset segregation at Criptorama

Senators Carlos Portinho and Soraya Thronicke emphasized the need for asset segregation to be included in any future regulatory regime in Brazil, particularly in light of the recent US SEC enforcement actions. Speaking at Criptorama, Portinho stated:

“It is an amendment that I put and defended tooth and nail in the Senate during the course of the crypto milestone. Now Senator Soraya is bringing back this proposal and I think it is important, otherwise we will end up demanding equity and leverage that will concentrate the sector.”

Specifically, Portinho stated that Congress was not “mature enough” to evaluate the bill as it was moving through the body last year. This likely resulted in lost opportunities to better understand and regulate the crypto sector, such as requiring asset segregation:

"Parliament has a very special and difficult function, because technology is the instrument of the new generations, and the Senate especially is made up of more experienced parliamentarians, the vast majority of senators are from another generation.”

Portinho also mentioned the need for legislation that would allow the public sector to enter the world of digital assets.

Exame Valor

CVM addresses asset tokenization controversy

Bruno de Freitas, superintendent of securitization at the CVM, addressed a recent letter published by the agency indicating that it views most asset tokens as securities.

In a talk at Criptorama, he noted the potential benefits of tokenization but highlighted the broader challenges that asset tokens bring from a supervision perspective:

“The technology allows you to take something that is not possible to sell to a wider audience and sell it to that audience.”

"And with that, it began to have several challenges. One of these was supervising, understanding this universe, and understanding that there is a world behind it that is investment, public financial investment opportunity for several investors, and this tends to take on the face of security. The token is the technological means, it itself is not security, what security is is what it represents, the financial asset.”

Freitas added that the these factors led the agency to offer crowdfunding as an alternative and as a compromise, though this idea wasn’t well received by the market. The crowdfunding mechanism can bring tokens to the market in a traditional structure, he argued, without reducing the advantages and benefits of issuing a token:

"The tokens are offered by exchanges, tokenizers and other means, have fixed or mixed remuneration, can be representative, backed or linked to credit rights, have interest payments dependent on cash flow and a remuneration defined by a third party.”

He did point out that the CVM letter does not have force of law behind it and that it was a technical opinion motivated by complaints about the products.

"Our objective is not to kill the use of technology, investor access. The objective is to understand this new market…What you can't do is continue operating outside of what the law provides, it's a risk. Anyone who wants to operate at risk can still operate." (Exame)

🎙BCR Podcast: Bringing Trust to Brazil’s Crypto Economy with Jonathan Levin of Chainalysis

I had the chance to sit down with Chainalysis co-founder and chief strategy officer Jonathan Levin in Brasilia to chat about how blockchain data services like Chainalysis can bring trust to Brazil’s emerging digital asset ecosystem. Have a watch below on YouTube or listen on Spotify

Levin also gave a talk at the event about why on-chain analytics are a necessary piece of the digital asset regulation puzzle in Brazil.

🎙Tokenizing Real World Assets with Alex Nascimento

Alex Nascimento of 7 Visions Digital and UCLA joined the show along with guest host Antonio Neto to talk about his work tokenizing “real world” assets and why he’s bullish on security tokens as the next crypto bull market driver. Check it out on YouTube below or on Spotify or Apple Podcasts

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🗞Brazil Crypto News Rundown

📈 Markets

Tether plans to apply for a license in Brazil once the rules are defined by the Central Bank and will undergo an audit if compelled by Brazilian authorities. CTO Paolo Ardoino told InfoMoney:

“As soon as we have more clarity, we will certainly be interested in seeking a license, and then, perhaps, starting an operation [in Brazil]”

Hashdex teamed up with insurance firm SulAmerica to launch a private pension fund that offers up to 20% exposure to cryptocurrencies. (CoinTelegraph Brasil)
Gustavo Blasco, CEO of Grupo GCB, argued that the potential of asset tokenization in Brazil is nearly limitless if regulated properly. He told Exame:

“Thinking macro, every asset is subject to tokenization. But this goes further. You can tokenize the entire gross domestic product, but also the entire stock of wealth, which is seven times greater than the GDP in Brazil, and there is also a whole agenda of expectation of rights that can be tokenized, of future payments. It is something almost infinite".

Brazilians invested US$2.4 million into cryptocurrency funds between May 28th and June 4, according to CoinShares data. The inflows come despite global outflows of US$62 million for that time period. (CoinTelegraph Brasil)
BEE4, the trading platform for tokenized shares of small companies with less than R$300 million in revenues per year, obtained an authorization from the CVM to extend its time in the agency’s regulatory sandbox to June 2024 after its first 12 month stint ends this month. (BlockNews)
Crypto exchange NovaDax is running a memecoin contest campaign that will give out up to R$2,000 to eligible participants. (CoinTelegraph Brasil)
UK fintech Lanistar launched enabled crypto trading on its app for Brazilian users. (CoinTelegraph Brasil)
Bitso began publishing crypto custody reports for its BTC and ETH holdings to demonstrate its financial health. To do this, it’s using a Zero Knowledge Proof developed by Proven called “Proof that Matters”. (BlockNews)
Exame talked to Mercado Bitcoin and 2TM executives about the significance of the exchange receiving a payments license from the Central Bank earlier this month
Brazilian billionaire Eduardo Salverin’s B Capital Group is in talks to raise US$500 million for a new venture capital fund focusing on early stage fintechs and startups. He previously invested crypto brokerage FalconX. (Valor)

📱Adoption + Digital Real

Transfero CEO Thiago Cesar shared his personal venture into crypto and the story behind Transfero in an interview with CoinTelegraph Magazine
Coinbase CEO Brian Armstrong highlighted Brazil and seven other countries vying to emerge as crypto hubs as industry flight from the US continues in Marketwatch op-ed
Brazilians use cryptocurrencies for payments at the supermarket more than anywhere else, according to Binance Card user data, though Binance did not specify proportions. Binance Card is a rechargeable card allowing payment in crypto. Subscriptions to streaming services and transport apps were also among the top uses. (CoinTelegraph Brasil) (Livecoins)
Tokenization of deposits and assets are the two key features of the Digital Real project that differentiate it from other CBDC projects globally, Fábio Araujo, director of the Digital Real project at the Central Bank, during a session at Criptorama last week.
The Central Bank is looking to create a Super App as part of its Open Finance initiative that integrates protocols, applications and data aggregation to offer traditional financial services with new solutions being developed by the bank. (Exame)
The Central Bank is planning to launch Automatic Pix, which aims to allow recurring payments for digital and physical businesses, Carlos Brandt, the bank’s lead executive overseeing Pix, said at Criptorama. (Exame)
Nubank laid off 296 of its 7,800 employees, informing of the move on June 7. (Estadão)
A new survey by Binance found that 83% of Brazilians think that liking crypto can be an attractive trait in a romantic relationship. (CoinTelegraph Brasil)
The second edition of Satsconf, Brazil’s largest bitcoin conference, will take place November 2-5 in São Paulo and will be headed by Lucas Ferreira of Lightning Labs. (Livecoins)
Agrotoken and Cibra announced a partnership with the goal of tokenizing more than 1 million tons of grains in Brazil. Raphael Nezzi, Cibra’s CFO, said:

“With the digital currency ‘in hand’, the rural producer will be able to buy his fertilizers, just as he would do using a bank slip or bank transfer, for example. It is one more payment option that he will have at his disposal. At Cibra, we always try to give the customer options so that he can choose the one that best suits him.” (CoinTelegraph Brasil)

SmartPay will begin testing its Truther wallet with 300 users. (BlockNews)
The Brazilian arm of German chemical giant BASF launched its own “recichain” tokens in partnership with Solvi Group - an environmental solutions company. Recichain tokens are linked to a ton of recyclable solid waste. (CoinTelegraph Brasil)
Green tech startup BMV Global launched a platform for tokenizing assets generated by environmental conservation initiatives in forests and other preservation areas. (Valor)
Brazil is less likely to adopt bitcoin as legal tender than countries like El Salvador or Paraguay, according to a CoinMarketCap poll. (Livecoins)
Educating the Brazilian population about the benefits of asset tokenization will be a big challenge, a panel of experts at Criptorama argued. Claudia Novo, head of new business at Liqi, commented:

“It is difficult to make people understand that the token is not the cryptocurrency itself, but something that represents an adjacent asset. Today, there are already many influencers who are starting to talk about this topic, but we still have a lot of issuers and few buyers looking for us.” (Portal do Bitcoin)

The third edition of the BitSampa conference took take place June 10-11 at the Expo Center Norte in São Paulo. Subjects discussed included Ordinals, DAOs, real-world asset tokenization and mass adoption
- At the event, National Treasury prosecutor Ana Batti detailed how she seized R$200 million of crypto assets in the GAS Consultoria case. (Portal do Bitcoin) (BeinCrypto)
Crypto payments firm Münzen announced that it will support Pix as an onramp for purchasing cryptocurrencies. (CoinTelegraph Brasil)

🎮 NFTs, Gaming and Metaverse

LATAM Airlines is displaying NFT artwork, developed through the SocialCrypto.art program, in its LATAM Guarulhos airport lounge for the next 12 months. The aim of SocialCrypto.art is to raise funds for the community of Morro Santo Amaro in Rio de Janeiro. (Livecoins)
Brazilian cosmetics giant Grupo Boticario plans to launch more marketing activations involving NFTS, company director Natalia Calixto said at the NFT Brasil event earlier this month. The conglomerate has already launched an NFT collection and will continue to test the technology.

“I look at the NFT a lot along these lines: ‘what possibilities can it bring me beyond what already exists? What can only an NFT or a crypto provide me?' These are areas that are still under study for us, but I am very optimistic about technology.” (CoinTelegraph Brasil) (Exame)

Attendees of a Nando Reis and Arnaldo Antunes concert in Rio de Janeiro June 12 will be able to purchase an NFT at the show that offers exclusive merchandise and experiences. (Exame)
Startup Prodonos launched its first collection of NFTs for tracking real estate developments in São Paulo state, with the first one being a 3,600 square meter development near São Jose dos Campos. (CoinTelegraph Brasil)

🏛 Policy, Regulation and Enforcement

Federal Police launched "Operation Criptocard” with the aim of combatting hackers have committed as much as R$19 million in crypto purchase fraud on Binance. Attackers use an “enumeration attack” where by they take data from stolen credit cards to discern valid usernames and great fake credit card numbers to make online purchases. 26 search and seizure warrants were served across five states in Brazil. (CriptoFacil) (CoinTelegraph Brasil) (Valor Investe)
The Receita Federal, Brazil’s tax authority, acknowledges that there exists a problem with individuals using USDT to illegally remit US dollars into the country.
- This phenomenon helps to explain the dominance of the stablecoin in Brazil’s crypto market. US$109 billion in USDT passed through the country in 2022 - almost 69% of crypto declarations for the year.
- Data from Q1 2023 shows USDT accounting for 82% of total crypto declarations (InfoMoney)
ABCripto and the CVM signed a cooperation agreement for financial education projects and regulatory sandbox initiatives. Nathalie Vidal, superintendent of protection at CVM, said:

“We want to improve our activities in the sandbox scope, directing the path of a prior analysis of the program's participants…Sometimes registration processes related to cryptoassets arrived in the sandbox and asked us about the layoffs of their business, and it is not the role of the CVM to provide this consultancy.” (Valor)

Several Brazilian representatives will attend the Western Hemisphere Cryptocurrency Working Group meeting on June 14-16 in Santago, Chile. The working group was established by the US Department of Justice. (Livecoins)
Vanessa Butella, head of legal at Mercado Bitcoin, argued that regulators need to look at tokenization with a “zero-based thinking” lens, which means looking at a new structure without trying to fit it into something at already exists. The comments came at the Bitsampa event in SP. (Portal do Bitcoin)
FGV law professor Tathiane Piscitelli argued that there exist gaps in Brazil’s crypto asset taxation structure. (Livecoins)
Supreme Court minister Alexandre de Moraes referenced the US SEC’s lawsuit against Telegram over its US$1.7 billion token sale in his justification for why the messaging app must appoint a legal representative in Brazil. (Portal do Bitcoin) (Livecoins)
Mansions, luxury cars and jet skis owned by Braiscompany executives and seized in Operation Halving will be put up for auction later this month. (Livecoins)
A private airplane owned by singer Wesley Safadão is also going up for auction with an initial bid of R$23.5 million. The plane is part of an ongoing lawsuit between Safadão and the “Sheik of Bitcoins” Francisley Valdevino da Silva. (Livecoins)
Federal Police are offering three new cryptocurrency courses to train officers. The classes include Cryptocurrency and Darkweb Investigation Techniques, Search and Seizure and Expert Examinations Involving Cryptocurrencies, and Basic Cryptoassets. (Portal do Bitcoin)

Brazil Crypto Report