#165: Consultation Season and All-Time Highs
Aaron Stanley
Builder | Creator | Catalyzer | Dot-Connector | Brazil | Web3 | Digital Assets
Plus: Bolsonaro not a fan of Drex; BeeFund crypto pyramid looking ugly
Olá pessoal!
Welcome back to ????Brazil Crypto Report for the week of November 4-8, 2024. And what a week it has been with markets ripping (bitcoin up to $86,000 as I’m writing this) in light of the Trump victory in the US. 2025 is going to be a wild year so get ready! ??
??We also saw the long-awaited second public consultation on crypto regulations from the Central Bank come through. You can read up on it below; I will also publish a podcast episode later this week where I break it all down.
No Devcon for me this year sadly — I’ve just returned from from Michigan where I was helping out with the largest collegiate blockchain conference in the United States. Lots of talent in the pipeline across the ~40 university groups that attended. Super bullish! Shout to Evan Solomon and his team for putting this together
Below you can find me paying homage to Michigan’s 2023 college football championship team??
? Before you read on, make sure you register for ABCripto’s Criptorama 2024 event on Nov 19-20 in Sao Paulo before tickets run out! The team has just released the full program and features a great lineup of speakers and sponsors discussing crypto adoption and policy issues in Brazil
?? What’s in this week’s BCR?
Thanks for reading and have a great week!
-AWS
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??New podcast!
No new podcast this week, but please check out this episode I recorded last with Hashdex CIO Samir Kerbage about the impacts of the US election on crypto markets!
Central Bank issues two new consultations for crypto regulations
Brazil’s Central Bank released two new public consultations regarding its intention to regulate the crypto asset market focusing on consumer protection, financial stability and operating requirements. The public will have until February 7 to submit feedback to these documents via the Participa Mais portal.
These come nearly a full year after the bank issued its first consultation on the subject, which sought responses to more than 30 questions from market participants.
The first consultation deals with the creation of companies providing crypto asset services. The framework calls for three distinct types of licenses — intermediaries, brokers and custodians — each with minimum capital requirements to balance operational risk. Intermediaries will require minimum capital of R$1 million, custodians R$2 million, and R$3 million for brokers.
Rodrigo Caldas de Carvalho Borges , an attorney at CBA | Carvalho Borges Araujo Advogados , told Valor:
“The minimum capital is to ensure that the players are able to provide the services for which they will be authorized…In fact, it creates an opportunity for financial institutions to enter this market, because they already meet stricter regulatory requirements.”
The second consultation regulates the processes for companies that provide virtual asset services. Regulation of these companies would be consolidated with regulation of companies operating in foreign exchange or securities due to the similar nature.
The specific documentation required and deadlines will be disclosed at a future date, the Central Bank said. It also committed to releasing a specific regulatory proposal by the end of the year defining how crypto asset companies can operate in Brazil.
The TLDR from all of this is that the focus on capital requirements, governance rules and consumer protection seems quite positive for large banks, brokerages and investment platforms.
Smaller crypto-native startups and institutions would have a harder time meeting the requirements because they would need to obtain virtual asset service provider (VASP) licenses. Existing regulated financial institutions would have an easier path to entry.
Speaking to Valor, Fabio Kupfermann Rodarte of Levy & Salom?o Advogados argued that this structure will likely restrict market participation due to heightened costs and suggested that the bank could instead create other means of authorization that are proportional to the individual risks presented.
?? Our friends at Machado Meyer Advogados have kindly provided an English language translation of the consultation documents if you want to have a look for yourself.
Receita Federal issues consultation on crypto tax rules
Brazil’s tax authority unveiled a public consultation of its own seeking opinions from the market on how it should update Normative Instruction 1.888 — the 2019 rule that stipulates how exchanges and individuals must declare crypto asset transactions.
1.888 would be replaced by a new rule that is being called DeCripto that would be broader in scope so as to cover new types of crypto assets that have been created since 2019. It would also introduce new rules developed by the OECD.
The draft rule states:
“DeCripto includes the concepts and rules of the [Crypto Asset Reporting Framework] model, such as cryptoassets, cryptoasset service providers, rules for assessing operations with cryptoassets and due diligence procedures.”
The new rule would also collect more info on crypto asset transfers flowing in and out of the country, as well as token rewards earned from airdrops, staking and mining.
Thiago Barbosa Wanderley , an attorney at Salles Nogueira Advogados , told Valor:
“The IRS is increasingly tightening its grip and requiring people to declare things that were previously off the radar, which are transactions with foreign exchanges.”
The consultation is open until December 6.
CVM to release consultation on asset tokens
Not to be outdone, the CVM — Brazil’s securities regulator — will also release a public consultation on reforming Resolution 88. The rule regulates offers in the crowdfunding system and now covers tokenized debt issuances.
The announcement was made by chief of staff Pedro Castelar during an event in Sao Paulo last week. The agency is receiving comments and suggestions from the industry about how to reform or improve the regulation. Castelar said:
“Resolution 88, when it was conceived, was to accommodate share sale transactions. It was not expected that it would have the volume that we currently see in debt transactions.”
Bernardo Srur , president of ABcripto - Associa??o Brasileira de Criptoeconomia , said that token offerings have surpassed R$1.3 billion in offerings since last year, but the activity has started to hit a regulatory ceiling. He told Valor:
“It is entirely possible that tokenization will help the capital market, but reforms are needed for this ceiling to be raised.”
BeeFund crypto pyramid freezes customer payouts
Crypto investment platform BeeFund is accused of blocking customer withdrawals and recently took its website offline. The company had promised investors 12.75% daily returns ?? and used TikTok to heavily promote the scheme to young people.
It announced recently that it would transform all customer balances into a new crypto called BEEB 2.0. To access their balance, users must first deposit 10% of their balance onto the platform via stablecoins ????
After publishing a report about BeeFund’s difficulties, Portal do Bitcoin claims that it received numerous complaints from clients unable to withdraw their funds. Reclame Aqui has also been littered with similar stories. Several users have said that even after they deposited the 10% they are still unable to access their funds. ??????
??Brazil Crypto News Rundown
?? Markets
“We have already had concrete examples of this, with cryptoasset ETFs - bitcoin, solana - and international strategy ETFs. I believe that these funds will continue to play this role, as a test for more complex investment theses in the market, because they are vehicles that allow for closer monitoring, thanks to the transparent dynamics of the class.” (Valor Investe)
?? Adoption
“Crypto is the most underrepresented asset class in national politics. A few percent of Brazilians have crypto, compared to a few hundredths of a percent among politicians. This doesn't seem healthy to me, because it's hard to legislate on something you don't really know about.” (Portal do Bitcoin)
?? Policy, Regulation and Enforcement
Full article! https://newsletter.brazilcrypto.io/p/165-consultation-season-and-all-time