#167: Chainlink enters the Drex CBDC pilot
Aaron Stanley
Builder | Creator | Catalyzer | Dot-Connector | Brazil | Web3 | Digital Assets
Plus: Receita Federal has info on overseas tx; Drex will be decentralized, BC says
Olá pessoal!
Welcome back to ????Brazil Crypto Report for the week of November 18-22, 2024, and welcome back to the bull market! It’s been a long, dry season for many of us but our patience appears to be paying off.
Wishing everyone happy trading over the next 6-8 months!
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-AWS
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Drex will not increase control over the population, BC says
While some have criticized the Brazilian Central Bank’s CBDC project as a potential lever for increasing government scrutiny and control over everyday citizens, bank officials argue that this is not the case.
Fabio Araujo , Drex coordinator at the bank, argued that this won’t be possible because Drex is decentralized — with participants operating their own nodes — and does not involve a state-run KYC process for everyone using the platform.
Speaking at the Criptorama event hosted by ABcripto - Associa??o Brasileira de Criptoeconomia , he said:
“Participants operate nodes and we do not KYC anyone. On top of the pseudo-anonymity that already exists on the network, if we manage to implement a ZKP solution [zero-knowledge proof privacy solution] it will be impossible to individually look at transactions. Only the bank can do this, as is already the case today.”
New participants will need to continue joining the platform to further decentralize, it was noted.
Araujo also emphasized that the bank has “nothing against” the cryptocurrency markets despite its development of Drex:
"We have nothing against the cryptocurrency market. The market is using digital asset technologies to manage risks and meet different demands. For example, some prefer more centralized solutions and others opt for decentralized alternatives. This depends on individual preference and the specific needs of the business.
He further explained that the bank’s goal is to bring the easy-to-use nature of cryptocurrencies into the traditional financial world, noting that Brazilians are currently more likely to invest in cryptos or bets than fixed income products or government bonds:
"It is easy for the user to access digital assets: just open an application, make the transaction and that's it. This simplified experience, combined with the ease of integration with digital channels such as banks and brokerages, is a crucial point that DREX seeks to incorporate into the system.”
Every exchange operating in Brazil must be authorized by Central Bank, Damaso says
As the Central Bank looks to rollout legislation that will regulate cryptocurrency exchanges in 2025, director of regulation Otavio Damaso asserted that companies operating in the country must receive authorization from the authority.
However, he recognized that there will be companies operating in Brazil that do not want to fall under this mandate. This effectively rules out the hypothesis that international exchanges could continue operating in Brazil without complying with rules published by the BC.
Speaking during a seminar by the Administrative Council for Economic Defense, he said:
“We don't even know how many cryptocurrency exchanges there are in the country and all of them will have to be authorized and supervised by the Central Bank….We will probably have a marginal market that will require major action.”
Carolina Pancotto Bohrer , head of financial system organization at the Central Bank, urged market participants to get ahead of the licensing game by getting an independent audit done.
“If I can give one piece of advice to anyone who is thinking about filing an authorization request for when the [crypto market] regulations come out: hire an independent auditor and audit the balance sheet to start the conversation.
Antonio Guimaraes, a consultant at the bank spearheading development of crypto regulations emphasized that this ongoing round of regulation is only the start:
“Regulation does not stop here. There is already an intention to delve deeper into some topics, such as stablecoins, which involve a specific degree of risk because they have an impact on the monetary policy of countries like Brazil.”
Crypto ETFs on the B3 hit all-time highs
Several crypto ETFs trading on Brazil’s stock exchange reached all-time highs as a result of the post election run-up.
Hashdex ’s HASH11 hit R$3.95bn in net asset value, while its BITH11 fund hit R$1.5bn.
Of the 17 crypto-related ETFs trading on the exchange, only 10 didn’t reach all-time highs last week
Chainlink enters Drex pilot program
The oracle provider announced its entry into the consortium being run by Banco Inter, Microsoft and 7Comm.
The group will use Chainlink technology and oracles in supply chain management and trade finance processes by using Delivery vs Payment and Payment vs Payment
Specifically, it plans to implement automated settlement of agricultural commodity transactions across borders, platforms and currencies.
The Chainlink Labs Cross-Chain Interoperability Protocol (CCIP) will generate interoperability between Drex and a foreign central bank to ensure that transactions are settled properly.
The consortium will test out a tokenized electronic bill of lading that triggers payments to exporters during the transport process.
Angie Walker , Global Head of Banking and Capital Markets at Chainlink Labs, said in a statement:
“We are excited to work with the Central Bank of Brazil, Banco Inter, and Microsoft to demonstrate how the adoption of blockchain technology, combined with Chainlink’s CCIP interoperability protocol, can transform trade finance.
OKX: Brazil regulation leaves “much to be desired”
Brazil is a “sleeping giant” market as a variety of regulatory barriers are preventing it from fully opening up, OKX Brasil compliance lead Rodrigo Fran?a said during a panel at Criptorama.
Specifically, he noted that Brazil is behind due to its prohibition on crypto derivatives and futures:
“The country is one of the only giants that does not directly allow crypto operations with derivatives and futures contracts. Neighboring countries in Latin America already have stronger regulation. Brazil now has the chance, with the public consultations, to get closer to more mature markets.”
Receita Federal says it has data on overseas crypto holdings
Brazil’s tax authority says that it has information on bitcoin and crypto transactions carried out by Brazilians overseas and that it will begin charging taxes on these assets in 2026.
The announcement was made during an event at the Center of Industries of the State of S?o Paulo. It reflects a growing interest in collecting taxes on crypto trades undertaken on platforms based outside of the country.
??Brazil Crypto News Rundown
?? Markets
“Latin America has clearly become a strategic priority for us and we will continue to invest and grow here…in terms of local teams. Right now we are very focused on creating campaigns and products that attract Latin American users.”
?? Adoption
?? Policy, Regulation and Enforcement
“There is already an intention to delve deeper into some topics. One of them is the regulation of stablecoins, which is an asset that involves a more specific degree of risk, because it has impacts in terms of monetary policy.” (Portal do Bitcoin)