#153: Binance settles with Brazil's securities regulator to end derivatives probe

Plus: Nubank crypto volumes up 80% in 1H; Parfin raises US$10m Series A

?? Linkedin's algorithms and distribution are becoming less favorable for creators and newsletter publishers. If you're reading this on Linkedin, please consider subscribing on Substack to ensure that you're receiving everything!

Olá pessoal!

Welcome back to ????Brazil Crypto Report for the week of August 12-16. I hope everyone had a great weekend.

ICYMI former billionaire Eike Batista is back in the news, this time to trash cryptocurrencies. In a podcast interview with TC Investimentos co-founder Rafael Ferri, Eike explained that he doesn’t like bitcoin and other cryptocurrencies because they are not backed by anything, and cautioned people against getting involved.

Recall that when Batista’s empire of oil, mining and logistics companies collapsed roughly 10 years ago, he went from being one of the world’s richest men to practically a commoner. Love him or hate him, the man knows a thing or two about dubious investment schemes, so it’s worth at least hearing him out in this context. Not investment advice!

Lots of news this week so let’s dive in!

??What’s in BCR this week?

• Binance settles with the CVM to end a multi-year probe into its derivatives offerings
• Parfin raised a US$10 million Series A round from ParaFi Capital, Framework Ventures and others
• Nubank reported an 80% increase in crypto trading volumes during the first half of 2024
• Receita Federal to propose tighter tax reporting rules for exchanges
• Gabriel Galipolo, likely successor to Roberto Campos Neto as president of the Central Bank of Brazil, argued that Drex could help reduce interest rates incurred by borrowers throughout the economy

Thanks for reading and have a great week!

-AWS

Brazil Crypto Report is presented by

Kaleido is the most trusted digital assets and blockchain company by enterprises. Their product suite is the ultimate business blockchain cloud and is rated #1 for tokenization and #1 for blockchain-as-a-service. Kaleido is powered by open source, supports multiple protocols, connects to permissioned and public chains, and lets you utilize any smart contract. Tokenizing assets in a scalable and interoperable way has never been easier.

Built by veterans of IBM Blockchain and Consensys, the Kaleido platform combines turnkey functionality with enterprise-grade security and scalability to power your application — whether it be in banking and financial services, supply chain, media, government & public sector, or central bank digital currencies.

Learn more and try it free at Kaleido.io

Binance settles with CVM to end derivatives probe

Binance, represented by its local B Fintech entity, will pay R$9.6 million (US$1.8 million) to settle a probe into its unlicensed offering of derivatives products to Brazilian customers.

In a document describing the settlement terms, the CVM said Binance was performing:

"distribution and mediation of operations with securities offered to citizens residing in Brazil without being a member of the securities distribution system and without obtaining the necessary registration or exemption from registration with the CVM."

In July 2020, the CVM ordered Binance to cease offering these products to Brazilian users. The exchange complied with the order by removing relevant language from its website.

However, it was later discovered that Binance customer support was directing Brazilian residents to circumvent the restriction by changing the language on its trading interface from Brazilian Portuguese to Portuguese from Portugal (credit to Portal do Bitcoin for this reporting). These revelations prompted the CVM to re-open its investigation.

Binance offered to pay R$2 million to settle the probe last year, but that proposal was rejected by the CVM.

A Binance spokesperson said in a statement:

"Since the regulator’s first communication to Binance in 2020, the exchange has taken all steps and necessary actions to respond to the authority and comply with local requirements…CVM's board decision to accept the proposed Term of Commitment reaffirms that the adjustments and upgrades made by Binance throughout time are sufficient for the regulatory agency."

Pablo Cerdeira , an attorney at Galdino Coelho Mendes Carneiro Advogados who represented Binance in the case, celebrated the decision:

"There were two years of much dialogue, several analyzes carried out by the entire technical area of the CVM – whose very high qualification is unanimous throughout the market –, orders with the entire board so that, finally, this result could be reached, which I think is positive for all."

CoinDesk The Block BlockTrends Valor Exame InfoMoney CriptoFacil Livecoins BlockNews CoinTelegraph Brasil BeinCrypto

Parfin raises US$10 million Series A

ParaFi Capital, Framework Ventures , L4 Venture Builder and Núclea participated in the funding round.

Parfin , which was founded in 2019, said it has now raised US$38 million in total funding to date and is planning a second round of Series A financing to bring in another US$16 million.

CEO Marcos Viriato said in a statement:

“Parfin advocates a unified finance (UniFi) approach combining the best of traditional (TradFi) and decentralized (DeFi) finance, which has already helped global financial institutions benefit from blockchain technology.”

The company says it will use the capital to continue developing its Rayls network — which is a permissioned EVM chain tailored for enterprise use cases like tokenization and CBDCs — and to continue its expansion in Latin America and globally.

Ben Forman , managing partner at ParaFi Capital , said:

“Parfin has built best-in-class software products to get financial institutions on track with blockchain…The Parfin team is qualified to capture this opportunity and has already made great progress bringing Latin America's leading financial institutions into the sector.”

Startups.com The Block CoinDesk Valor CoinTelegraph Brasil

Galipolo says Drex could reduce cost of credit

Gabriel Muricca Galípolo , director of monetary policy at the Banco Central do Brasil who has been floated as the likely successor to current president Roberto Campos Neto, argued that Drex could help reduce interest rates paid by borrowers throughout the economy.

Speaking at the Finance of Tomorrow event in Rio de Janeiro, he said:

"The structure designed based on Drex can create advances in collateralized credit, which can reduce spreads by reducing the perception of risk on the part of those who lend the resources."

Galipolo has previously made less-than-bullish comments publicly about the Drex project.

During his remarks at the event, he also said that 90% of the demand for crypto currently in Brazil is related to USD-paired stablecoins.

Speaking at a separate event in Sao Paulo, Galipolo suggested that cryptocurrencies and online betting platforms may be diverting resources from other sectors like retail — arguing that this is an area that requires further investigation.

“An issue that seems anecdotal, but which has been growing a lot, is the issue of so-called bets, betting games. There are a lot of grown-up people offering explanations there to understand the gap that we see between income growth that does not appear in consumption growth or savings growth”

CoinTelegraph Brasil Money Times Portal do Bitcoin

Receita Federal: new tax rules for exchanges in 2024

Brazil’s tax authority met with crypto brokerages operating in the country to encourage voluntary compliance and present proposed changes to reporting requirements, such as a project to obtain more information about individuals using these platforms.

The authority plans to modify the rules for declaring cryptocurrencies and the method for collecting information about investors who use international exchanges with operations in Brazil. It says that it is adhering to the Crypto Asset Reporting Framework, a set of best practices established by the OECD.

Regarding the meeting, the Receita Federal stated:

“it mentioned its expertise in data processing, highlighted the need to improve ancillary obligations to meet international standards and discussed the importance of Brazil having a business environment with clear tax rules, facilitating compliance by all.”

Portal do Bitcoin CoinTelegraph Brasil InfoMoney BlockTrends Livecoins

Nubank crypto volumes up 80% in 1H

The digital bank reported a 79.5% year-over-year increase in crypto trading volumes during the first six months of 2024.

It posted a net profit of US$487 million in the second quarter, up from US$225 million during the prior year period.

The bank now reaches 95 million customers in Brazil.

CoinTelegraph Brasil

??Brazil Crypto News Rundown

?? Markets

• 95% of crypto users in Latin America believe that the crypto market in the region will continue to advance in 2024, according to a new report from Binance. (CoinTelegraph Brasil)
• MB | Mercado Bitcoin now offers loans against cryptocurrency collateral. MB users can request loans of up to 30% of their crypto holdings at the exchange. The brokerage also began offering Solana staking. (Valor) (Portal do Bitcoin) (CoinTelegraph Brasil) (BeinCrypto)
• Brazilian crypto funds saw US$20 million in inflows during the week of August 5-9. (Portal do Bitcoin)
• The B3 exchange highlighted its cryptocurrency operations to its investors and stakeholders, most notably that its average daily trading volume was R$104,000 during July, up 56% from June. (Livecoins) (Exame)
• Speaking at Rio Innovation Week, Binance VP of Latam Guilherme Nazar re-emphasized that Brazil is a key market for the world’s largest exchange.

“Without a doubt, Brazil is among the 10 markets most likely to be successful in the crypto industry. Brazilians are very open to new technologies. We have a cutting-edge financial system and an international reference, and this, without a doubt, impacts Binance’s growth in the world.” (BeinCrypto)

• Brazilian users can now purchase 80 cryptocurrencies via Pix as part of a new collaboration between Changelly and MoonPay . (CoinTelegraph Brasil)
• Mercado Bitcoin is partnering with GVAngels to enable investments of up to R$50 million in startups of various stages in Brazil. (Portal do Bitcoin)

?? Adoption

• Valor profiles the Amazon Tech House project that seeks to bring Web3 literacy to indigenous communities in the state of Rondonia. The chief of the village of Gamir, located 480 km from the capital city of Porto Velho, said at the Finance of Tomorrow conference in Rio de Janeiro:

“With our tech house we have the possibility of training in distance learning courses, inside or outside Brazil, directly from the Amazon rainforest. Furthermore, we can take advantage of Web3 to access financing for projects.”

• Brazil is a global leader on stablecoin innovation — ahead of China and the US, argued Felipe Taborda , director of Latin America at Taurus. (CoinTelegraph Brasil)
• Lumx and Chiliz announced a partnership that promises to simply the onboarding of customers and users via Lumx APIs. (Exame)
• Brazilian skateboarding legend Bob Burnquist joined the Exame Future of Money podcast to discuss the upcoming NFT.Brasil event.
• Banco do Brasil announced that it will accept bitcoin and seven other cryptocurrencies for payments into pension plans. However, upon reaching the pension fund, the money will be converted from crypto into reais. (BeinCrypto)
• The US$23 billion Brazilian Artificial Intelligence Plan presented by the Lula government has the potential to make Brazil a global leader in AI, Minister of Science, Technology and Innovation, Luciana Santos said in a recent interview. (CoinTelegraph Brasil)
• Central Bank president Roberto Campos Neto held a virtual meeting with Ben Horowitz of Andreesen Horowitz on Friday, August 16. Also present at the meeting were Angela Strange , Gabriel Vasquez and Jen Kha of a16z. (Portal do Bitcoin)
• The 2024 edition of Satsconf will take place November 8-9 in Sao Paulo, with featured speakers Alex Gladstein of Human Rights Foundation and Bitcoin Core maintainer Gloria Zhao. (Livecoins)
• Nathalia Arcuri, a financial influencer and founder of the Me Poupe! educational platform revealed that she’s been studying bitcoin since 2016. While she’s excited about the technology, she doesn’t see crypto as an instrument for financial inclusion in Brazil:

"Bitcoin is no longer the future of money, it is the present. Whether as investors or citizens, you must see Bitcoin as something necessary…I'm not very optimistic about financial inclusion through cryptocurrencies. There is a very strong social barrier, and, on top of that, most people can't even save – and when they do, they end up keeping money at home." (Livecoins)

• Drex is a way of bringing new economic assets and foreign investment into the financial system, argued Otávio Damaso — director of regulation at Brazil’s Central Bank — at the Voga Conference 2024 in Brasilia. He also said that the programmable nature of Drex will create new solutions and efficiencies in areas that current experience lots of friction — like buying a car:

“Within a programmable currency like Drex, you will be able to program it so that when the conditions have been met, it automatically executes in all directions and you eliminate friction that exists in the economy with this whole dilemma of who pays and who delivers.” (Valor) (CoinTelegraph Brasil)

• 35% of Brazilian companies are preparing for the arrival of Drex by seeking to identify use cases and potential product market fit. (Exame)
• Savings (45%), fixed income (22%), cryptocurrencies (31%) and insurance (24%) are the most popular financial products in Brazilian state capitals outside the southeast region, according to a study by Futura Inteligência and Apex Partners . The study cites the explosive growth of Nubank’s crypto platform as one of the factors driving adoption in Tier 2 cities around the country. (Valor)
• Former Central Bank president Gustavo Franco said that Brazil is close to the “gold medal” when it comes to digital money and the digitalization of the financial system. He also argued that Drex represents a return to old money standards involving currencies backed by strong assets. Speaking at the Finance of Tomorrow event, he explained:

“Brazil is a global example in dealing well with digital money, digitalization and all these other topics. We are doing very well... It is difficult to win a gold medal, but Brazil is close to it on this topic.” (Valor) (CoinTelegraph Brasil)

• 64% of respondents said that they would stop using Pix if a fee were applied to the transaction, according to a survey conducted by Fiserv Brasil. The survey also showed that users aren’t super excited about new features like Pix Parcelado or Pix Programado. (Exame)

?? Policy, Regulation and Enforcement

• ABcripto - Associa??o Brasileira de Criptoeconomia says it will publish a set of self-regulatory rules for asset tokenization businesses in September, in an attempt to preempt eventual rules from the CVM on the subject. The framework, which would need to be approved by the group’s board, would provide“clear and robust standards for the issuance and trading of tokens, providing greater transparency, security and trust for the entire market.”
• Brazil’s gambling regulator concluded its rule-making process implementing a new national law on online betting and gaming. (Vixio Regulatory Intelligence)
• Asset tokenization experiments conducted within the CVM regulatory sandbox will be tested in the Drex environment during the second phase of the upcoming pilot. Antonio Carlos Berwanger , Superintendent of Market Development at the CVM, said at the Finance of Tomorrow event in Rio:

“The regulatory sandbox demonstrated that the interest in tokenization was not just in issuance, in the possibility of public fundraising, but in having the possibility of transacting assets. All approved projects had this secondary bias. So we are going to test the assets that are under the CVM umbrella in the Drex environment”

• 11 Brazilian prosecutors will travel to a workshop in Peru focusing on cybercrimes involving cryptocurrencies, with the United States government paying the bill. (Portal do Bitcoin)
• Patrick Abrah?o, who was once arrested for his involvement in a cryptocurrency pyramid scheme called Trust Investing, and singer Perlla are no longer a couple. (Portal do Bitcoin)
• Federal Police executed Operation Aluir, which resulted in R$6 billion (US$1.1 billion) being blocked. The operation aimed to dismantle a criminal organization that used cryptocurrencies for money laundering purposes. A former Banco do Brasil manager is among those involved in the scheme. (Livecoins) (CriptoFacil) (Portal do Bitcoin)
• Globo highlighted the stories of Brazilians who have lost significant sums of money using dubious cryptocurrency exchanges. (Portal do Bitcoin)
• Luxury items belonging to “Sheik of Bitcoins” Francisco Valdevino da Silva will be auctioned off on the Kronberg Leil?es website this week. (BeinCrypto)