🇧🇷Brazil Crypto Report #30: CryptoCars Rug Pull 🚙
Bom dia 👋 and welcome to 🇧🇷 Brazil Crypto Report for the week of Jan 31-Feb 3, 2022.
Some big news in BCR-land: you may have seen in your inbox last week our inaugural Portuguese language translation of this newsletter. We’ll be doing this on a weekly basis from here on out. Special thanks to Thiago for his help with the translation.🚀
Some housekeeping on that point: Moving ahead, the Portuguese edition will be a separate product with the same content (for now) within the BCR Substack. It will be sent to the same distribution list. If you would like to receive it moving forward, you don’t need to do anything. If you’d prefer not, you can unsubscribe from it and still receive the English version. You can also unsubscribe from the English version and just receive the Portuguese edition. For the time being, the Portuguese edition will go out a day or so after the English, but eventually we will send them out at the same time.
What’s happening this week?
💥 Hashdex in the FT: Brazilian crypto asset manager Hashdex’s forthcoming DeFi ETF was featured on January 31 in the Financial Times. In the article, Hashdex’s Bruno Ramos de Souza discussed the company’s strategy of using Brazil as a beta test for these products and eventually rolling them out elsewhere:
“Our expectation, in general, is that the regulators will become ever more comfortable with structures like this and acknowledge that this is a way to buy into the market that the regulator can see and touch, and can engage with the issuers.”
🔥 O Globo columnist Gustavo Cunha had a nice piece explaining the cultural appeal of Bored Apes NFTs and young celebrities are flocking to these assets.
📉 Upside Down World: it’s been a rough couple of weeks out there in the markets. We made a point toward the end of the year to highlight bitcoin’s standing as the best-performing asset in the Brazilian market for 2021 and Brazil’s Ibovespa as the worst performing asset. Well, in January 2022 those positions inverted, as bitcoin lost 22% while the Ibovespa gained 7%. It’s unclear how long this trend will continue, particularly with the looming rate hike from the US Federal Reserve. In the meantime, keep buying the dip!
🤕 CryptoCars has been officially labeled a “rug pull” by CertiK after several of its community channels were shut down and its CCAR token lost 99% of its value. the play-to-earn blockchain game that has 30,000 members in its Brazilian Telegram group. CCAR is the third-most trending crypto in Brazil per CoinGecko. Among unfortunate was a prominent Brazilian YouTuber who lost R$200k.
Até mais and we’ll see you in the news review after the break,
Perguntas? Sugestões? Find me at email@example.com, @AaronStanley on Telegram or on Linkedin
🙏 Special thanks to NEAR Foundation for supporting Brazil Crypto Report!
If you’re new here, the meta-thesis for this publication is that Brazil - with a population of 214 million and a US$1.8tn economy - is the most overlooked crypto market in the world. The objective is to highlight the important news and provide useful context for the English-speaking audience.
🗞Brazil Crypto News Rundown 🗞
Turkish exchange Bitci announced that it will set up an operation in Brazil and that it has partnerships with several Brazilian football clubs, including Sport Club do Recife, Fortaleza, Coritiba, Vitória and Ceará. Despite being a relatively unknown player in the global exchange market, Bitci inked a deal in 2021 to issue the fan token for the Seleção Brasileira (Brazilian national football team). “We are opening a cryptocurrency exchange in Brazil because we have valuable assets there,” said Bitci CEI Onur Altan Tan. (Portal do Bitcoin) (Reuters) (CoinTelegraph Brasil) (CryptoTimes) (Estado de Sao Paulo)
Brazilians traded more than 20,400 bitcoins in January, down 16% from the prior month and 23% from November. Roughly one-third of that volume occurred on Binance. Cointrader Monitor stated in a report:
"Following the devaluation of cryptocurrency against the national fiat currency, the volume of Reais needed to carry out the movement of this amount of Bitcoins suffered a large reduction of 33.54%.” (CoinTelegraph Brasil) (CoinTimes)
Bitcoin was the worst performing asset in the Brazilian market during January, despite being up nearly 11% year-over-year. (Portal do Bitcoin).
The real-pegged BRZ stablecoin registered R$5.7bn in trading volume in 2021. BRZ was launched by by Transfero in 2019 (US$1.1bn) and has registered R$7.4bn (US$1.4bn) in volume in that time. (Valor Investe)
Mercado Bitcoin opened trading for six new cryptocurrencies: Gnosis (GNO), Polkastarter (POLS), Orchid (OXT), PlayDapp (PLA), Keep3rV1 (KP3R and Wrapped LUNA (WLUNA). (Portal do Bitcoin)
Zro Bank, the Recife-based digital bank focused on crypto, has reached R$3bn in conversions between BRL and bitcoin since the company was founded in September 2020. In addition to performing traditional services of a bank, Zro allows its user to send and receive reals or cryptoassets with immediate liquidity. It was also the first institution in Brazil to offer a bitcoin cashback credit card. (CoinTelegraph Brasil)
The inflows of bitcoin and cryptocurrencies in Brazil topped US$6bn and further expanded the country’s balance of payments gap in 2021, per data from the Banco Central. While there are no formal customs records for cryptos so they cannot be included in foreign trade statistics, the Banco Central estimates total crypto transaction volume based on exchange contracts. The institution began classifying crypto transactions in its overall balance of payments statistics in 2019 per recommendation by the International Monetary Fund. (CoinTelegraph Brasil)
Moss, the issuer of the MCO2 carbon credit token, raised US$10m in its Series A investment round. The round was led by SP Ventures and Acre Venture Partners, with participation from Jive Investments, Flori Ventures and The Craftory. (CoinTelegraph Brasil)
Digitra.com announced the launch of a new OTC desk that will offer trading on more than 1,000 cryptocurrencies for institutions, companies and high net worth clients. The company is headed by former Mercado Bitcoin CEO Rodrigo Batista, who estimates Digitra.com to trade US$1bn (R$5.3bn) in 2022. Batista commented:
“The cryptocurrency market is still in its infancy and has already created the first unicorns. I decided to create a place to trade cryptocurrencies in a safe way, with liquidity and exclusive service as is already being done abroad. Digitra.com Private & OTC is a first step to better serve the digital assets market.” (CoinTelegraph Brasil)
Hashdex projects that its DeFi ETF will launch on February 17 with initial funding of R$500m (US$94m). Potential investors have until February 11 to make their reservations. (CoinTelegraph Brasil) (Valor Investe)
Popular fintech app Méliuz launched a product allowing customers to buy, sell and earn cash back in bitcoin. The buy and sell feature is available currently to a portion of the user base, with the remaining users being onboarded in the coming weeks. The crypto cashback feature will be activated “soon,” per the company. (CNN Brasil) (InfoMoney)
Stefany Ferrer, a Brazilian footballer playing for Tigres Femenil - one of Mexico’s top football teams, has been transferred to US-based Angel City FC in a deal fully paid for with cryptocurrency and brokered by Bitso, the Mexico-based crypto exchange. (CoinTelegraph Brasil)
The National Council of Justice (CNJ in Portuguese) signed a contract with Brasilia-based company Dataprev to build a tool using blockchain technology to help secure, share and update information across the Brazilian judiciary system. The contract is worth R$79k (US$15k). (Portal do Bitcoin) (CoinTelegraph Brasil) (CoinTimes)
Passfolio now offers a bank account and debit card for Brazilians in the US that allows users to avoid the 6.38% IOF (tax on foreign financial transactions) when spending dollars. Users can add funds to the wallet via ACH, Pix or by transferring cryptocurrency. (CoinTelegraph Brasil)
Infomoney has a handy guide on what to know about paying cryptocurrency income in Brazil.
CoinPayments is planning to double its footprint in Brazil in 2022 with a goal of closing the year with 5 million clients using the product and R$2.2bn (US$400m) in total transactions. (BlockNews)
The boyfriend of Perlla, the popular Brazilian pop singer, has returned to Brazil and is promoting his company Trust Investing, which is suspected of operating a bitcoin pyramid scheme in Brazil and elsewhere. Patrick Abrahão had fled Brazil after reportedly receiving death threats from GAS Consultoria operator Glaidson Acácio dos Santos - aka the “Pharaoh of Bitcoins”. (Portal do Bitcoin)
Nubank appears to be blocking customers from making purchases on Binance, according to complaints posted on Reclame Aqui. (Livecoins)
Chicão Bulhões, Rio de Janeiro’s secretary of economic development, said stablecoins like BRZ could be used to provide financial services to underserved residents and favelas and elsewhere. He also revealed that the idea of pivoting Rio into a crypto hub emerged from a dinner between city officials and key ecosystem actors like Marcelo Sampaio of Hashdex.
“There it became very clear that we have an interesting ecosystem of serious people who are investing in cryptocurrencies, which encouraged us a lot given that Rio de Janeiro has a history of being very strong in the financial market.” (Portal do Bitcoin)
🎮 NFTs, Gaming and Metaverse
Marcos Pontes, Brazil’s Minister of Science Technology and Innovation met with Meta (formerly known as Facebook) to discuss enabling the metaverse at scale in Brazil. (Livecoins)
BlocPlace, a new Brazilian marketplace for NFTs launched its platform during a boxing match between Whindersson Nunes and former world boxing champion Acelino "Popó" Freitas. (Exame)
A pair of Flamengo players, Andreas Pereira and David Luiz purchased a Mutant Ape Planet NFT, a new collection inspired by the popular Bored Ape collection. (CoinTelegraph Brasil)
The mayor of Uberlândia held an official meeting in Horizon Workrooms, a metaverse platform built by Meta (aka Facebook) using an Oculus headset. (CoinTelegraph Brasil)
Fábio Faria, Brazil’s Minister of Communications, said it is important that companies quickly adapt to the metaverse during remarks at a retail industry event in São Paulo. He explained, citing Walmart as an example:
“It is important for companies to quickly adapt to this new technology, in this new business model”. (Portal do Bitcoin)
The “Disco de Quintal” album featuring prominent Brazilian independent artists and musicians now has its own “NFT Lagunitas” collection, featuring four pieces of 3D digital artwork. (CoinTelegraph Brasil)
🏛 Public Policy and Enforcement
The Brazilian Senate will take up debates around cryptocurrency legislation in February. The Aureo Ribeiro bill passed by the Chamber of Deputies in December has been introduced in the Senate and forwarded for processing, assignment of a rapporteur and ultimately voting. However, there are multiple competing bills in existence, meaning that a path forward is difficult to forecast. (CoinTelegraph Brasil) (Livecoins)
The Banco Central confirmed that ~2000 Pix users had their keys leaked. (CriptoFacil)
The Brazilian Association of Financial and Capital Markets Entities (ANBIMA) will include crypto in its self-regulatory rules. (Livecoins)
Santander is asking in court that two Binance bitcoin wallets be revealed after being linked to a fraud involving Gerdau, a Brazilian publicly-traded steel company. Hackers allegedly gained access to Gerdau’s Santander account and sent R$30m (US$5.7m) to Binance to buy bitcoin. (Livecoins)
Civil Police in Minas Gerais are investigating an alleged cryptocurrency pyramid scheme in the city of Conselheiro Lafaiete in which at least six victims lost a total of R$2m in the supposed investment scam. (CoinTelegraph Brasil) (Livecoins)
MSK Invest did not comply with an agreement it signed to return funds to investors and has proposed an extension to buy additional time. The company promised investors 5% monthly by investing in cryptocurrencies, but stopped paying clients late last year. The firm had agreed to begin reimbursing clients in five installments beginning January 30; none of the payments appear to have been issued. (Portal do Bitcoin) (Livecoins)
Binance was ordered to unfreeze the account of a Brazilian client with a R$20,000 per day penalty for non-compliance. The company has filed an appeal asserting that it has nothing to do with the incident, arguing that B Fintech Servicos de Tecnologia Ltda - Binance’s representative in Brazil - is a different entity from Binance. Both companies, however, have Changpeng Zhao as their main partner. (Portal do Bitcoin) (Livecoins)
The CVM, Brazil’s securities authority, issued an investor alert warning of the risks posed by initial coin offerings and cryptocurrencies. (Livecoins)
Michael de Souza Magno, right hand man of GAS Consultoria founder and “Pharaoh of Bitcoins” Glaidson Acacio dos Santos, had Habeas Corpus petitions denied by the Supremo Tribunal Federal and the Supremo Tribunal de Justiça. The requests were denied on the grounds that Magno was intending to flee the country should he be released. He has been held in custody since last October (Portal do Bitcoin) (Livecoins)
Federal Police in Mato Grosso do Sul arrested a businesswoman connected to the GAS Consultoria case. Eliane Medeiros, who ran the brokerage CointradeCX, was taken into custody as part of Operation Valleta, an offshot of Operation Kryptos - which took down Glaidson and GAS last August. She is accused of helping Glaidson send GAS client funds abroad. (Portal do Bitcoin) (CoinTelegraph Brasil) (Valor Investe) (Livecoins) (InfoMoney) (Estadao)
Federal Deputy Kim Kataguiri has filed a request to suspend the taxation of crypto-to-crypto transactions, arguing that this practice is illegal and unsupported by tax law precedent. He stated:
“Recently, the IRS, when responding to a query, decided that the exchange of crypto-assets is a taxable event. We understand that such a solution is illegal. In fact, a new type of taxation was created through income tax, without any provision in the laws dealing with such tax.” (Livecoins)
Police in Rio Grande do Sul shut down a clandestine cryptocurrency mining farm in Morro Reuter that had more than 100 mining rigs powered by stolen electricity. Two people were arrested and R$1m (US$190k) worth of mining equipment was seized. (Portal do Bitcoin) (CoinTelegraph Brasil) (CoinTimes)
The Superior Tribunal de Justiça, Brazil’s Supreme Court, denied a Habeas Corpus request for two executives of Criptbank, an alleged crypto pyramid investment scheme that promised 10% yields while embezzling the funds. (Portal do Bitcoin)
The STJ denied another Habeas Corpus petition for a crypto pyramid schemer - this time for Fernando Ewerton Cesar da Silva, one of the leaders of Kriptacoin - a fake cryptocurrency scam that generated R$250m (US$47m) of revenue from 40,000 investors. (Portal do Bitcoin) (Livecoins)
Mining Express, a Brazilian company suspected of running a bitcoin pyramid scheme, had mining equipment seized in Ukraine. (Livecoins)
Police in Amazonas captured the leader of an alleged bitcoin pyramid schemer in Manaus known as the “King of Cryptocurrencies”. (Livecoins)