🇧🇷BCR #97: ex-Bacen president Meirelles stands with CZ and Binance

Plus: Itaú joins ABCripto; Brazil's new crypto law comes into effect; MB + Caixa Digital Real consortia revived

Jun 26, 2023

Olá pessoal!

Welcome to 🇧🇷Brazil Crypto Report for the week of June 19-23, 2023. I hope everyone had a better week than I did - been pretty sick the last few days but crypto in Brazil never sleeps so alas I’m still here.

Let’s kick this thing off

-AWS

🤝 Foe becomes Friend: Itaú joins ABCripto

Itaú, the largest bank in Brazil and Latin America with more than 70 million customers, became the first TradFi bank to join ABCripto, a trade association and lobby group representing the crypto industry. ABCripto president Bernardo Srur said in a statement:

“The bank will contribute with attributes that are its brand in the market, such as extensive knowledge, technology and innovation. It is a relevant partnership that will provide new opportunities for investment and evolution for Abcripto, stimulating innovation and financial inclusion.”

Itaú has strengthened its ties to crypto over the last year. It launched a bitcoin ETF in partnership with Galaxy Digital last November (BITI11 on the B3 exchange), announced plans to offer crypto custody services later this year, made a strategic investment in asset tokenization firm Liqi and began to act as a distributor for various crypto funds.

Previously, Itaú had taken a more hostile approach to the industry by closing bank accounts of customers and companies involved in crypto.

Guto Antunes, head of digital assets at Itaú, said:

“We believe in the potential of the cryptoeconomy as a transforming agent in the global financial market and we recognize the importance of being engaged in this ecosystem. By joining ABCripto, we put Itaú Unibanco in direct contact with the main players and specialists in the sector, which will allow us to exchange experiences and actively contribute to the development and regulation of the cryptoeconomy in Brazil.”

(Valor) (Portal do Bitcoin)

🏛 Brazil’s Marco Crypto law takes effect

The law, passed last December, officially came into effect on June 20th after a six month grace period. Here are the practical immediate impacts:

Virtual assets are now officially defined as “the digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes”
Financial crimes committed using digital assets are now subject to 4-8 years imprisonment
The Lula Administration has officially named the Central Bank and CVM as regulators over the industry. Both agencies will now work to create a regulatory structure and licensing process overseeing their respective mandates.
- The BC announced this week that it will hold an open forum to solicit feedback from the public. "The regulation is under construction and we intend to hold a public consultation to hear society before releasing the definitive rule,” the bank stated. The bank will be the primary regulator overseeing virtual asset service providers in the country.
- The CVM will have authority over digital assets that have the characteristics of securities (ie determined by the Howey Test) although the law does not directly address the question of when a crypto asset is or is not a security
The main point of contention from here on out will be the question of asset segregation. This requirement was stripped from the final legislation, but the Central Bank has signaled that it will try to include this in its regulatory structure.
- However, there are significant questions as to whether the bank has the legal authority require this without a specific legislative mandate
- Binance and other overseas exchanges have pushed back on asset segregation requirements and will presumably continue to do so
There are still concerns among investors about what the new law means for taxation of crypto assets in Brazil and whether traders can continue to use foreign exchanges. I recommend the below video (in Portuguese) with InfoMoney’s Paulo Alves and Fireblocks advisor Nicole Dyskant for more info

(Portal do Bitcoin) (CoinTelegraph Brasil) (Valor) (InfoMoney)

💪 Meirelles advising CZ on regulatory woes, stands with Binance

Henrique Meirelles, the former Central Bank president turned Binance advisor, argued that Binance is not being singled out in the US, but rather that the SEC had left the crypto market “fully liberated” in recent years and was forced to take action aggressively. This dynamic is quite different from Brazil. In an interview given at the BlockchainSP/Digital Finance Brasil event, he stated":

“Brazil is regulating before problems happen. It's different from the SEC, which is prosecuting and looking to punish those who abused regulation earlier.”

Meirelles also denied rumors that he would be severing ties with Binance as enforcement actions against the exchange globally continue to pile up.

“I don't have any executive position at Binance, I'm on the advisory board and the idea is to make suggestions that may or may not be followed by the company. There is no major concern on the board.” (Valor)

Indeed, the former Finance Minister continues to advise Binance CEO Changpeng Zhao on how to handle its ongoing regulatory problems in both the US and Brazil, including a summons to testify before a new congressional investigative committee (CPI) focusing on crypto pyramids.

He also said that it is “normal” for company executives to be asked to testify before a committee such as the CPI, particularly given Binance’s size.

Meirelles also elaborated on his role on Binance’s Advisory Board during trying times. His position remains resolute given that he sees crypto and the underlying tech as “the path of the future”. Per Portal do Bitcoin, he stated that the purpose of the board is to minimize any spillover impact that the regulatory tightening in the US might have on other markets in which the exchange operates.

“I am part of a board that presents suggestions. It is nothing of direct participation in the company. And in this regard, I, along with the other members of the board, have been making suggestions that it is up to the company to adopt or not,”
“[Binance] has been facing difficulties in the United States, but the Board is making suggestions for exactly that to be resolved and addressed. And mainly not to expand to other countries and that there are no problems in other regions of the world.”

Meirelles also spoke to BeinCrypto about how cryptocurrencies and tokenization can have a positive impact on Brazil’s agribusiness industry, and by extension the country’s trade balance.

He also took the opportunity to highlight how the US is falling behind with regards to crypto assets, calling the SEC’s actions “excessive”. He added:

“We are seeing the United States still lagging behind in terms of crypto assets. Even more so considering that the SEC is entering a phase of lawsuits, of judging cryptocurrencies that they consider to be proceeding wrongly and misguidedly.”

Henrique Meirelles at BlockchainSP. Source: Portal do Bitcoin

👻 Back from the Dead: Mercado Bitcoin and Caixa Econômica consortia are approved

After being passed over during the initial selection, MB’s proposed consortium - which included Mastercard, Genial Investimentos, Sinqia and Cerc - was approved by the Central Bank on Thursday June 21 following an appeal.

The Central Bank excluded consortia that did not have at least one regulated financial or payment institution involved, and Mercado Bitcoin received its payments institution license from the Bank on June 2nd after the original selections were announced.

MB’s Fabrício Tota told Valor:

"Our participation validates the Central Bank's intention to bring innovation to the financial system with those who had already been working with this technology and not just with the incumbents who appropriated it."

Caixa’s consortium also includes Microsoft and Elo, the card brand, with the aim of testing the programmability of tokenized money in recurring payments.

The re-emergence of MB and Caixa brings the total number of participants up to 16. Another 20 rejected participants have until June 30 to win their appeals to be included in the pilot program, Rafael Bianchini - the BC’s financial risk regulation coordinator- stated Friday (Valor). He also added that the node installation on the for the Digital Real test network will begin at the beginning of July.

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🎙New 🇧🇷BCR Podcast Episodes

⚖️ Measuring crypto sentiment in Brazil with André Salem

Cryptum CEO André Salem joined the show to to discuss a new survey that his team commissioned interviewing more than 1,000 Brazilian retail and professional investors on their views toward crypto, tokenization, Digital Real and more. Lots of nice nuggets in here so definitely worth a listen.

You can read the full report here and listen on Spotify, Apple or Google podcasts or on YouTube below.

🗞Brazil Crypto News Rundown

📈 Markets

Mercado Bitcoin received a custodian license from the Central Bank of Portugal. CEO Reinaldo Rabelo stated:

“This license recognizes the governance and best practices adopted by the MB with regard to the custody and segregation of assets, anticipating the guiding principles of regulation in the European Union (MiCA) and allowing the provision of services to every country that recognizes this license." (CoinTelegraph Brasil)

MB will also launch a crypto fund out of Portugal targeted at Brazilian multimarket funds, which will soon be able to invest 10% of their assets directly in crypto assets as long as the trades are executed in a regulated market. The fund will offer general crypto assets as well as fixed income tokens starting in October. MB legal director Vanessa Butalla commented:

“Our understanding is that we can offer this service to Brazilian funds, bearing in mind that here the 175 does not talk about custody, but about authorization for trading. This goes for both crypto and token.” (Valor)

The exchange Bitcoin Trade changed its name to Ripio Trade, with the aim of strengthening the Ripio brand in Brazil. The Brazilian exchange was acquired by the Argentinian exchange Ripio in 2021. (CoinTelegraph Brasil) (Portal do Bitcoin) (Livecoins)
Crypto exchange BitMart is setting up a dedicated team in Brazil with the first hire being Luiz Henrique Brandão as marketing director for the region. Brazil is already the exchange’s largest market in the region. VP of marketing Nickolas Hoog told BlockNews:

“This happened with an organic increase, initially. So we decided to be more proactive here, offering new tokenized assets that make sense for users, conversions between crypto and fiat currency, and integration with Pix to make it easier for users to enter.”

Parfin announced that it received an investment from Accenture’s venture arm. The value of the contribution was not revealed, but it came as part of the US$15 million round announced back in January. (Valor) (BlockNews)
Hashdex’s João Marco Braga da Cunha wrote a good op-ed for Startups.com spelling out the differences between crypto and venture capital investing
Mercado Bitcoin received approval from the Central Bank to access financial and banking data held in the Central Bank Information System (Sisbacen). (CoinTelegraph Brasil)

📱Adoption + Digital Real

Satsconf, Brazil’s largest bitcoin-focused conference, will take place in São Paulo November 2-5. The event is being organized by Lucas Ferreira and features a new partnership with Area Bitcoin. (CriptoFacil) (Portal do Bitcoin)
Infrastructure provider Paxos published a post discussing why it is bullish on the Brazilian market
The International Monetary Fund recognized Brazil as a world leader in crypto asset adoption and for its Digital Real proof-of-concept in a blog post
Banco Inter will test tokenized Treasury bonds for use in client trading and transactions with other banks as part of its participation in the Digital Real pilot. (Valor)
This coming week’s Febraban Tech conference will feature several sessions focusing on crypto and tokenization. (BlockNews)
Brazil blockchain and crypto personality Courtnay Guimaraes predicts that tokenization as a use case will begin to take off starting in July. (Exame)
Football club Gremio is planning to launch its own fan $IMORTAL fan token in partnership with BTG Pactual’s Mynt and Win the Game. (Exame)
UK-based crypto payment services provider Ramp expanded its services to include 40 new global currencies, including the Brazilian Real. In addition, CEO Szymon Sypniewicz told Fortune that he’s very bullish on the regulatory approach that Brazil is taking and that the Brazilian Central Bank’s friendliness to crypto has been a pleasant surprise.

“They aim to be a great, very pragmatic regulator for crypto companies, and we are actually going to engage directly with them, obviously, to be able to continue building out our offer, and to continue operating in Brazil.”

Brazilian edtech Instituto de Educação Decentralizada (Indeed) launched a “learn-to-earn” token that can be used to deduct college tuition and pay for extracurricular courses. (CoinTelegraph Brasil)
The state of Mato Grosso will implement by 2025 a blockchain platform to improve internal processes and services made available to citizens, pursuant to a new directive. (CoinTelegraph Brasil) (Livecoins)
Brazilian blockchain gaming startup Trexx took first place in a hackathon in Argentina, hosted by Ripio, for a marketplace for leasing game items represented as NFTs with multichain compatibility. (Exame)
A hospital in Rolante, a city in Rio Grande do Sul, became the first hospital in the country to accept bitcoin as payment, Livecoins reports.

🏛 Policy, Regulation and Enforcement

Federal Police and Interpol arrested three Braiscompany partners in Argentina on Friday, June 23. The detained individuals - Victor Hugo, Sabrina Lima and Arthur Lima - were apprehended in the city of Misiones, which is 18 km from Brazil near Iguaçu Falls. (CoinTelegraph Brasil) (Portal do Bitcoin)
The Parliamentary Commission of Inquiry (CPI) focusing on cryptocurrency pyramids issued summons to convene numerous witnesses to give testimony, including Central Bank President Roberto Campos Neto and CVM President João Pedro Nascimento. Deputy Ricardo Silva will formally serve as rapporteur for the committee.
- Other individuals summoned include Rental Coins creator Francisley Valdevino da Silva, aka the “Sheik of Bitcoins”, leaders of the MSK Invest scheme. (Portal do Bitcoin) (CoinTelegraph Brasil)
- CPI President Aureo Ribeiro also requested that “all appropriate measures” be taken to summon Braiscompany founders Antonio Neto Ais and Fabricia Campos to testify. The couple has fled the country and are believed to be in Argentina. (Portal do Bitcoin) (Livecoins)
- The presence of “Pharaoah of Bitcoins” Glaidson Acácio dos Santos, operator of the GAS Consultoria scheme, has also been requested - along with his wife Mirelis Zerpa. (Portal do Bitcoin)
- It appears that representatives from numerous exchanges operating in Brazil will also be called in to testify
- Binance Brazil director Guilherme Haddad Nazar (nephew of former presidential candidate and current Minister of Finance Fernando Haddad) was also summoned as a witness at the request of Deputy Alfredo Gaspar. He pointed out that other crypto pyramids like Braiscompany have used Binance to move their assets. He stated:

“Therefore, we can deduce that Binance is entirely intertwined with the motivation of this CPI and it is essential to understand its performance in the country, its relationship with B Fintech (its official representative), as well as its connection with companies that respond in court for harming Brazilian consumers.” (Portal do Bitcoin)

Binance responded to Nazar’s summoning by suggesting that all crypto exchanges operating in the country participate in the CPI. The exchanges said in a note to Livecoins:

We hope that all exchanges and financial institutions that are related to the Commission's theme will participate in the CPI, and that this will be an opportunity to disseminate Binance's best practices to other players in the sector, especially smaller exchanges, preferred targets of fraud and scams, so that together we can build a secure crypto ecosystem that protects users in Brazil.”

Mirelis Zerpa, the wife of the “Pharaoh of Bitcoins” Glaidson, has been publishing AI generated songs and poems on a YouTube channel that was previously used to defend GAS Consultoria. (Portal do Bitcoin)
Fiji Solutions, the latest alleged crypto pyramid to emerge out of Paraíba, opened a company in the British Virgin Islands in February shortly after it halted payouts to customers, InfoMoney reports.
The CVM is expected to publish revised guidance on security token issuances in the second half of 2023. (Valor)
Daniel Maeda, superintendent at the CVM, said that the US SEC has a broader view of what constitute securities that its Brazilian counterparts. (Valor)
Maeda also emphasized that DeFi tokens are not exempt from regulatory scrutiny and that the underlying technology has little to do with whether an asset is considered a security or not, stating at the BlockchainSP event:

“People sell certain structures and technologies with the same libertarian discourse as bitcoin, which has no one behind it. Despite the speech, when you delve into it, you realize that there is a central agent, an entrepreneur aligned with the success of that issue. I don't see DeFi as an exempt concept.” (Valor) (Portal do Bitcoin)

A judge in Paraná denied a request by the PT (Workers’ Party) to determine if Senator Sergio Moro holds any cryptocurrencies. (Livecoins)

Brazil Crypto Report