#180: Eike Batista's crypto comeback takes shape
Aaron Stanley
Builder | Creator | Catalyzer | Dot-Connector | Brazil | Web3 | Digital Assets
Plus: Central Bank releases Drex Phase 1 report; Binance pushes back on proposed regulations
?? If you haven't already be sure to check out Merge Buenos Aires, which takes place March 24-26 in the Argentine capital. The conference is an exciting opportunity to connect Europe and Latin America through Web3 and will provide a great pulse check on crypto adoption in the region. I'll be attending and I hope to see some of you there as well
Olá pessoal!
Welcome back to ????Brazil Crypto Report for the week of February 24-28, 2025.
I hope everyone is having a safe and healthy Carnaval week. I’m going to celebrate by playing some tennis and doing a couple day trips over the coming week.
The big news of this week is Eike Batista’s attempted comeback, but I devote a substantial section below to the Drex pilot report released by the Central Bank. It provides lots of valuable insights into the project, and it’s pretty honest in addressing the successes and failures.
There’s a decent amount of FUD commentary about the report floating around on social media and in Whatsapp groups; some of this is perhaps deserved but it’s important to keep expectations in-line and remember that this is a PILOT project.
On Wednesday I’m going to be releasing a Drex reaction podcast episode with some of the key players, so be sure to check that out if you’re interested in learning more.
?? What’s in this week’s BCR?
Thanks for reading and have a great week!
- AWS
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“Major Adaptation Needed”, says BC report on Drex Phase 1
The Drex CBDC project can still live up to its intended promise, but some changes will need to be made and the timeline will be longer than originally expected.
That’s the takeaway from a technical report released by the Central Bank of Brazil last week detailing from the first pilot phase of Drex, the hybrid CBDC/tokenization platform being developed by the entity.
The report states:
“It is likely that a major adaptation effort will be necessary so that the Drex Platform can serve as infrastructure for innovative services aimed at society.”
The 73 page report presents a technical overview of the first pilot phase — examining governance, scalability, infrastructure, regulation and business case components of the project. Most notable among these is the so-called “Drex Trilemma” of privacy, programmability and decentralization.
Privacy remains the Achilles Heel
Not surprisingly, the report draws the same conclusion that the bank has signaled publicly for months, namely that issues like privacy and data protection remain significant challenges that require further research and testing.
Specifically, the project has not been able to find a balance between providing sufficient privacy and anonymity as required by Brazil’s consumer data protection laws, while providing necessary visibility for authorities:
"The report analyzes the solutions tested, raising potential challenges. It concludes that further in-depth analysis is necessary to ensure that the platform complies with privacy, data protection and security requirements.”
Testers were able to anonymize transactions using architectures like zero-knowledge proof network segregation and privacy by access control, with tools like Anonymous Zether, Parfin ’s Rayls and EY Starlight.
These solutions have been successful in providing privacy and anonymity of transactions. But they also hid transactions from authorities who need to be able to monitor transfers, identify wallets and block balances if necessary, and deploying these in business contexts needs further testing. The report concludes:
"The lack of control by the authorities over tokens and the limitations in programmability and composability show that the state of the solutions lacks maturity with respect to the essential requirements for a robust and dynamic financial system."
Phase 2 Overhaul
In a surprise move, the bank also revealed that it will cancel Phase 2 testing of solutions that are not already involved in the project due to redundancy and lack of resources. These include 100 use case proposals the bank received from the market during its call for submissions late last year. It stated:
“In addition, the level of engagement required from the teams involved in this phase of the Drex Pilot has been extremely high. For these reasons, the BC decided not to expand the cases being tested in phase 2.”
The BC concluded that the new uses cases submitted were not sufficiently novel to warrant allocation of additional resources. Recall that the bank’s technical teams are also working to maintain the Pix and Open Finance projects.
Fabio Araujo , Drex coordinator at the bank, explaind at an event hosted by ClearSale that the first phase of the project required more engagement and oversight from bank staff than originally expected:
“We are interested in the projects submitted, but it would require a lot of effort from the BC. Either we could not have adequate engagement or it would overload us.”
Centralization vs Decentralization complications
Araujo also explained that the BC will need to “adjust guidelines” and “ensure maturity” before bringing the project to market. He noted that the bank had to help refine the business flows of many of the participating teams that didn’t fully grasp the centralized vs decentralized dictonomy:
“We realized at the beginning of the process that most of the participants, with the exception of the liquidity pool, brought solutions that were very close to what exists in the traditional market.
Ultimately, the BC’s responsibility of reviewing business flows of the current participants proved overly demanding, he stated. This workload:
“ended up causing a not very good result for the selection of the second stage, because we did not have the personnel available to add new use cases.”
Phase 1 results
The bank will continue testing the 13 use cases submitted by the 16 participating consortia that participated in Phase 1. These range from credit collateralized in public bonds to transactions with tokenized real estate.
Phase 1 of the Drex pilot featured 16 consortia participating in issuing, transferring and burning the Drex currency.
Phase 2 expectations
The ongoing second phase of the Drex pilot — in which consortia develop their own smart contracts directly on the Drex network — is scheduled to be completed this June, though that deadline is considered tight given that the problems from the first phase have yet to be resolved.
Marcelo Queiroz , superintendent of market strategy at ClearSale , said at the event:
“We may not be able to do all the tests, or we may have to choose only one of the solutions, given the implementation time. Especially because we have to develop all the smart contracts for the use case we have chosen.”
CoinTelegraph Brasil reported that the second phase of Drex will be divided into four stages, the first of which has already been completed. The second phase now involves testing of the the 13 original use cases.
CVM and Anbima
The CVM, Brazil’s securities regulator, and Anbima, its capital markets trade association, are studying the possibility of creating a separate parallel system to Drex to expand the reach of the second phase, but the feasibility is uncertain.
The CVM was previously invited to run a node on the Drex network but was unable to do so because of a lack of resources. With Anbima involved, this option becomes more realistic.
Araujo explained:
“In this new platform, the Central Bank would also collaborate to ensure that the two environments interoperate naturally.”
But Drex still makes sense!
Araujo defended the mission of Drex and argued that the project will continue ahead despite moves by other countries, like the US, to ban CBDCs.
The re-emergence of the US as a relevant crypto market only helps smaller countries that have been exploring these solutions for some time:
"Technologies were evolving a lot in companies outside the United States because there was no support, and when an economy the size of the US enters, you gain scale. This aspect is completely positive."
Araujo defended the concept of a CBDC for emerging markets, particularly in the context of cross-border payments. However, he emphasized that there is no reasonable way to implement stablecoins in this manner without authorities participating in the system:
"With an emerging country's currency, there is no way to do this with just stablecoins, without the central bank's involvement.
Eike Batista launches $EIKE token to finance sugarcane project
Brazilian billionaire Eike Batista is launching a cryptocurrency to finance his newest venture in the energy sector, known as Brazil Renewable X (BRXe).
The Solana-minted token is in the pre-sale phase. It will be available on brokerages once US$100 million is raised in the initial round.
BRXe looks to use a special high-yield variety of sugarcane (called “supercane”) that would triple ethanol production and generate 12 times more biomass than regular versions of the crop. The company will develop sustainable fuels for aviation and invest in creating in biodegradable plastics and biotech materials.
Eike said during an announcement event in Rio de Janeiro:
“I am certain that it will be revolutionary in the context of the energy transition and in positioning the country as a clean energy hub.”
$EIKE is being marketed as the world’s first “real-world sustainability token”. $EIKE token holders will receive dividends in the form of airdrops corresponding to the project’s profitability and cashflow (payments would be in either SOL or USDC). The total supply will be one billion $EIKE tokens.
Eike was once Brazil’s richest man and was the 7th richest in the world in 2012, with a personal fortune valued at US$35 billion before his business empire collapsed in 2015. He was subsequently convicted of several financial crimes before having charges dropped.
However, it’s important to note that Batista is not contributing any personal funds to this project and is only lending his name and personal brand to the project — functioning as a promoter of the venture. His personal assets still remain frozen by courts pursuant to the judicial recovery of several of his previous companies.
Recall that earlier this year, Eike began promoting his newfound appreciation for bitcoin and cryptocurrencies on social media networks, saying that he’s made a 180 degree turn
Claudia Mancini and the BlockNews team went through the EIKE whitepaper very closely and found some questions and inconsistencies. Worth a read if you want to follow in more depth.
Binance pushes back on Central Bank regulatory proposals
Binance raised several key considerations in its formal responses to two public consultations on digital asset regulation put forth by Brazil’s Central Bank.
While praising the bank’s forward-thinking, pragmatic and transparent approach to creating regulatory and licensing framework for crypto brokerages in the country, the exchange raised several key pain points that it says need to be addressed in the final regulation.
Binance’s VP of Latam Guilherme Nazar said in a statement:
“Regardless of criticism and areas for improvement, we recognize the efforts of the Central Bank to regulate a disruptive market, with global technology, placing Brazil at the forefront of the global regulation of virtual assets and their respective service providers.”
These points of contention include:
“There is a great risk that restrictive regulation will encourage Brazilian users, especially those who move large volumes, to migrate to fully decentralized environments, making any centralized supervision or adequate monitoring and control impossible, with significant impacts on the market and the application of regulation.”
??Brazil Crypto News Rundown
?? Markets
"If we want to reach 1 billion users, Brazil will be very important. It has a large population, a history of adopting financial technologies and a regulatory scenario that is moving in a direction that makes sense, potentially with more clarity this year".
“Ovo Coin is not just a joke; it is a symbol of protest and a cry of indignation in the face of the absurd situation we are living in: eggs, one of the most basic and accessible foods on the Brazilian table, now cost 1 real per unit.
?? Adoption
?? Policy, Regulation and Enforcement
“This technology cannot become a monopoly of a few countries and a few companies. Large corporations do not have the right to silence and destabilize entire nations with disinformation.” (CoinTelegraph Brasil)
Full article: https://newsletter.brazilcrypto.io/p/180-eike-batistas-crypto-comeback