#120: Titanium Asset under investigation by Federal Police
Plus: OKX launches in Brazil; Senate approves 15% overseas crypto tax
Olá pessoal!
Welcome to 🇧🇷Brazil Crypto Report for the week of November 27-December 1, 2023.
I hope everyone had a great weekend. If you haven’t yet done so, please take a minute to fill out this brief reader survey. We’re going to be scaling out BCR in 2024 and would greatly value feedback about what we’re doing well and where we could be improving.
Also, as of today we are migrating to a freemium/premium model. There are two primary reasons for this:
we’ll need additional resources in 2024 as we continue to expand
it’s impossible to determine the true reach of a platform like this without paid subscribers. Because we are building a microplatform for an audience of professional stakeholders from Brazil and abroad, traditional metrics like clicks and opens don’t provide a full picture of the value that we’re creating.
Free subscribers will continue to receive email notifications about new podcasts and portions of the Brazil and Latam newsletters. Paid members will receive full access to content and some other goodies that we’ll be rolling out in 2024.
If you find our work valuable, I ask you to consider supporting BCR for $150 a year. If that ask is too steep or you’re having difficulty expensing that amount to your employer, etc, shoot me a note and we’ll figure something out.
👊 Please know that the ultimate goal of this platform has not changed: to be a public good that helps drive adoption and awareness of the digital asset ecosystem in Brazil and Latam.
💡Questions? Comments? Feedback? Feel free to respond to this email or ping me on Linkedin
👊Also, please do give 🇧🇷Brazil Crypto Report a follow on X/Twitter, Linkedinand Instagram if you don’t already. It helps out a ton!
📢 Before we dive in, I wanted to flag the first-ever XRP Ledger hackathon in Brazil, which is taking place December 13-17. The XRP Ledger is emerging as an alternative layer on which to build the tokenized Brazilian economy. US$10k in prizes are up for grabs, so definitely worth a look if you’ve got an idea for a financial application and looking for a place to start.
🎙New podcast
For this week’s episode I am joined by Alexandre Vasarhelyi, chief investment officer at BLP Crypto. We discuss the new CVM Resolution 175, which came into effect in October and permits Brazilian investment funds to allocate up to 10% of their AUM in crypto assets. This dramatically reduces the barriers to entry for hedge funds and other large players to enter the market, and comes at an exciting time ETFs in the US on the verge of being approved.
CVM Resolution 175 is a potential game changer for the Brazil crypto market, so it’s definitely worth your time to listen and understand what’s happening here.
🎧 As a reminder, you can find all of Brazil Crypto Report content wherever you listen to podcasts: Spotify | Apple Podcasts | Amazon | Anchor | YouTube
Federal Police investigate Titanium Asset
Titanium Asset is the subject of a Federal Police investigation probing the whether the R$1 billion (US$200 million) crypto fund manager is operating as a pyramid scheme.
Police obtained a court order to temporarily remove the managers and mandate the closure of three of Titanium’s five crypto funds. The impacted funds are Structure, Cripto Access and Galaxy, which respectively hold R$73 million, R$5.8 million and R$3 million in assets. The funds had all transactions blocked, inclusive of redemptions and liquidations of shares.
Photo credit: Infomoney
28 search and seizure warrants were carried out in Balneário Camboriú, Palhoça, Porto Alegre, Curitiba and São Paulo against 72 individuals and companies. Operation Ouranós, as it is called, also ordered the blocking of R$400 million (US$80 million) worth of assets, including 473 properties, 10 boats, 40 luxury vehicles and 111 bank accounts.
Police said that the scheme raised R$1 billion from 7,000 investors in 17 states through the public offering of investment contracts, which supplied fixed and variable remunerations generated through cryptocurrency arbitrage strategies.
“Based on this billion-dollar fundraising, the resources were transferred to various accounts held by various companies, through asset shielding, with the aim of emptying the assets of the clandestine financial institution. The tracking of illicit resources showed that those investigated were carrying out 'money centrifugation', a system in which various levels are used in passing accounts, with bank transfers being divided".
Titanium confirmed the actions to Valor but argued that the blockages were the result of a “mistaken court order” and that the entities targeted by the PF are part of a different economic entity:
“Titanium Asset clarifies that the company is not involved and does not yet have detailed information on the investigative procedure…The company is most interested in clarifying all points and will spare no effort to collaborate with the authorities in whatever is necessary.”
The asset manager has hired the firm Siqueira Castro as legal defense.
Vortx, which acts as the fund administrator for Titanium’s funds confirmed the blockages:
“Vórtx informs that it is in contact with the then fund manager in search of further information that may have led to the receipt of the aforementioned court order.”
King of Bitcoin connection?
InfoMoney reports that Titanium Asset partners Claudio Miguel Miksza Filho and Guilherme Bernert Miksza previously did business with the “King of Bitcoin” Claudio Oliveira, who was convicted of embezzlement and crimes against the financial system in 2022 for his role in the R$1.5 billion Grupo Banco Bitcoin pyramid scheme.
The partners reportedly tried to launch a cryptocurrency together with Oliveira called LeaxCoin in 2019, according to a statement provided to Federal Police by a former employee.
Marcos Antonio Carmo, Titanium’s legal director, said that the partners did not create LeaxCoin and were also victims of the Banco Bitcoin pyramid.
InfoMoney Valor Investe Portal do Bitcoin CoinTelegraph Brasil BlockNews
OKX officially launches in Brazil
OKX, the second-largest crypto exchange in the world, formally launched its Brazil operation on November 27. The exchange had previously served the country using the international brokerage model, but now has local management and support team of 15 people, a Pix integration and a local banking partner in BTG Pactual.
The product suite includes a brokerage that spot trading, conversion and fiat to crypto rails, a non-custodial digital wallet that incorporates multi-party computation and account abstraction, a staking service, and integrations with DeFi products and decentralized exchanges. OKX also promises to promise Proof of Reserves attestations routinely.
The operation is being led by Guilherme Sacamone, who previously worked at Crypto.com, Meta and PicPay, and will aim to provide the same level of customer service and compliance standards as local exchanges, but with the products, pricing and liquidity that only a large international exchange can offer. In that sense, OKX will aim to offer the best of both worlds. Sacamone explained to Portal do Bitcoin:
“Global companies present a one size fits all service. Local exchanges offer a very intuitive service, because at the end of the day they are Brazilians building for Brazilians. But the product portfolio is more limited. We want to position ourselves exactly at the intersection of these two worlds: to have the autonomy in Brazil to build a product for places with global crypto excellence,”
The Seychelles-based company has an official local entity (CNPJ) and plans to establish a strong physical presence in the country, so as to be adequately close to regulators and focused on compliance.
The decision to expand into Brazil was a relatively straightforward one for the company due to the size of the market and the incoming regulatory framework. Sacamone elaborated:
“This regulatory framework and the clarifications that are already coming today were very positive and made things much easier. We already have some operational clarity, which product we can have, which product we cannot have. It was very positive and easy to sell internally and globally for the company, to prioritize Brazil.”
Controversial tax reform passes the Senate
The Senate approved a broad tax reform bill seeking to collect tax revenue from Brazilian citizens with income and investments held in overseas entities. The government expects to raise R$3.2 billion through the reform.
The law imposes a 15 percent capital gains tax on these assets, including cryptocurrencies. It should be noted that this tax is not actually new; what’s new with the legislation is that it does away with the previous exemption of up to R$35,000 worth of operations per month and modifies the tax bracket structure.Arthur Barreto, a lawyer at Donelli e Abreu Sodri Advogados, told Valor:
“What the project changes is the tax collection period and the currently applicable tax bands.”
Previously, taxation of overseas assets was treated the same as capital gains realized inside the country: a tax rate of zero on income of less than R$6,000 per month, and 15% for gains between R$6,000 and R$50,000.
The package was previously approved by the Chamber of Deputies and now advances to the president for signature.
Portal do Bitcoin CoinTelegraph Brasil
Brazil’s Bitcoin ETFs Approach US$100m in AUM
CoinDesk had a good article about Brazil’s bitcoin ETFs, which are now approaching US$100 million in assets under management.
The piece featured an interview with Hashdex CEO Marcelo Sampaio, who argued that the success of these ETFs should be scene as a positive indicator for the market more broadly.
“There is a growing positive sentiment across the most sophisticated investors and we’ve been seeing increasing interest from some of the largest institutions whether that be either allocating or considering adding crypto soon to their portfolios.”
Gui Silva, a managing partner at Tagus Capital, argued that the number of crypto asset investors in Brazil will only continue to grow.
“There are about 4 million investors with accounts at the B3 stock exchange in Brazil and around 700,000 of these invest in ETFs…About one-third of those investors allocated funds to crypto ETFs last year."
Beyond just bitcoin, Hashdex revealed that its entire portfolio of spot crypto ETF in Brazil hold roughly R$1.8 billion (US$365 million) in total AUM. The largest of these is HASH11, which consists of a basket of assets and holds R$1.4 billion total.
Elsewhere on the ETF front, Valor Investe had a good article talking about the impact that a spot bitcoin ETF product in the US will have on crypto markets broadly. Hashdex CIO Samir Kerbage argued that the availability of spot bitcoin ETFs will dramatically simplify and expand access to the asset:
“The absence of an investment vehicle that fully met regulatory requirements and was compatible with the sophisticated management systems of these investors, placed bitcoin - and, by extension, the crypto market - in an allocation limbo.”
Paulo Boghosian of TC Pandhora Investimentos explained that ETF products will open up an estimated US$48 trillion worth of assets under management at banks, investment advisors and brokers in the US:
“Achieving a 0.1% penetration in this market would already mean a substantial flow for an asset that currently has a low market capitalization in relation to other asset classes, and which has a limited supply.”
For those keeping track, bitcoin ETF pundits on Twitter are expecting approval to come in either the first or second week of the new year.
🗞Brazil Crypto News Rundown
📈 Markets
Vórtx, a fintech operating in the fund management space, has created a crypto trading platform aimed at institutional investors in conjunction with Mercado Bitcoin. The platform allows Brazilian funds to invest directly in digital assets using reals, pursuant to the rule changes of CVM Resolution 175. Guilherme Pimentel, product director at MB, explained:
“This makes life easier for the investment fund, as it does not need to send resources abroad, pay exchange spreads and taxes for this type of operation. It is a question of very big operational and financial efficiency. The fund’s resources are in Brazil, the shareholder is Brazilian and the crypto operation takes place in the country.” (Valor) (Portal do Bitcoin) (CoinTelegraph Brasil)(Exame)
Matera, a financial technology provider, is partnering with asset tokenization platform Liqi to offer a solution to banks and financial institutions looking to offer crypto to their customers. Matera CEO Carlos Netto explained:
“What we see is latent demand. And it is a demand that increases or decreases as bitcoin rises or falls. Many financial institutions think it is good to have this type of solution, mainly due to FOMO”. (Valor) (CoinTelegraph Brasil)
A judge at the São Paulo Court of Justice has prohibited Binance from accessing R$430 million that were blocked in its dispute with Capitual. The decision is yet another turn in the legal battle that has raged on for over a year. The court maintained that Binance cannot have access to the funds until the process is complete. (Portal do Bitcoin)
The BRLA stablecoin, issued by BRLA Digital, passed an independent audit conducted by auditing firm UHY Bendoraytes. With this in hand, the company claims to have the first BRL-pegged stablecoin with such a third-party seal of approval. CEO Matheus Moura explained:
“We will move forward with our plan to help web3-friendly companies grow in Brazil, in addition to strengthening the growth of BRLA as the main stablecoin for financial settlement in reais.” (Portal do Bitcoin)
🪙 Drex
Leonardo Linares, Mastercard’s SVP of products and services in Brazil, believes that Drex test cases will have gained significant traction by this time next year.
At an innovation event in Miami, he told Valor:
“Little by little the cases appear. I think that in the second half of next year we will start to have small cases in production…This is different in scale, but I think it is a reality that will come in the near future, in two years we should start to see more cases, which will gradually gain traction.”
Credit card giant Mastercard is a participant in the Drex pilot and brings its expertise in credentials management, privacy and security to the project.
On a separate note, Mastercard’s EVP for Latin America and the Caribbean Kiki Del Valle argued that there are problems with the Brazilian Central Bank’s current role as both regulator and a competitor in Brazil’s payments landscape market via Pix:
“I think the role of the regulator is an issue that needs to be corrected. Today, the regulator is a competitor for brands and the infrastructure operator….It’s a governance issue that we need to analyze in Brazil specifically.”
📱Adoption
Portal do Bitcoin profiled Rolante, a small city in Rio Grande do Sul that has the highest bitcoin adoption rate of any city in the world.
Controversial podcaster Monark joked about running for president in 2026 on the grounds of adopting bitcoin as an official currency and ending Drex and other CBDC initiatives. (Livecoins)
Payments giant Elo said that it has made a “giant leap” in understanding tokenization and Drex over the last year. Many of these learnings will be presented at the DemoDay Elo on December 4, where startups in the Elo Connecta accelerator will present their solutions. Innovation manager Gabriel Rodrigues told BlockNews:
“Going back a year ago, we had nothing on this topic. We had a little research, but no code.”
Petrobras has partnered with the Cardano Foundation to provide training for company employees on blockchain technology and NFTs. (BlockNews)
83 percent of Brazilian executives believe that Drex and digital assets will have a disruptive impact on the country, according to survey conducted by PwC Brasil. However, 59 percent are awaiting additional developments in the sector and only 3 in 10 are actively moving forward with adoption of the tech. (CoinTelegraph Brasil) (Exame)
Highline Venture launched an analytics platform called ARTEMIS aimed at Web3 creators. ARTEMIS uses artificial intelligence to help creators better understand their reach and metrics, and offers a token designed to facilitate a relationship between creators and fans.
TuneTraders launched its Tuneplay platform that allows exclusive access to a piece of music via the use of tokens. (BlockNews)
Grupo RÃO announced a Web3 based loyalty program through a partnership with the Moonbeam parachain network and Brazilian infrastructure platform DUX. Henrique Lemos, founder and CMO of Grupo RÃO explained:
“The launch of this loyalty program on Web3 reflects Grupo RÃO’s long-term vision, and demonstrates our commitment to creating real connections with our customers…Partnering with DUX allows us to provide more value to our customer base, and engage with them in ways that were not possible before.” (CoinTelegraph Brasil)
The Banco do Brasil Cultural Center in Rio de Janeiro will feature an NFT collection called Decades of the Oceans. (CoinTelegraph Brasil)
Only 15 percent of Brazilians know what stablecoins are, according to research commissioned by Coinbase. (CoinTelegraph Brasil) (Exame)
A commercial space overlooking Rio de Janeiro’s Santos Dumont airport is being sold for 0.7 bitcoin. (Livecoins)
São Paulo Futebol Clube is issuing tokenized tickets for its December 6 match against Flamengo in the Brasileirão tournament. The so-called “smart tickets” will provide holders access to a series of physical and digital experiences in addition to the match itself. The initiative is the result of a partnership between Sportheca, TresPontoZero and goBlockchain. (Portal do Bitcoin) (Exame) (CoinTelegraph Brasil)
Crypto tax expert and accountant Ana Paula Rabello is hosting a course about accounting in the crypto industry. (Portal do Bitcoin)
Binance was selected as one of the 12 certified companies with the best user evaluation score in the “Investment” category by the Experience Awards 2023. It was the only cryptocurrency company among the finalist institutions. (CoinTelegraph Brasil)
58 percent of small Brazilian companies are preparing to operate in a world without cash, a new study by Visa found. 92 percent of entrepreneurs surveyed hope to operate completely digitally at some point. (CoinTelegraph Brasil)
Brazil’s Federal District is the latest state to begin using a new blockchain-based ID program developed by Serpro. The tech is being used for issuance of identity cards known as RGs. (CoinTelegraph Brasil)
BNB Chain is launching the 7th cohort of its acceleration program with the goal of incubating 100 new ideas to be developed the chain, and it wants Brazilians to participate. Thiago Hirano, community manager at BNB Chain in Latin America, told CoinTelegraph Brasil:
“Brazil is one of the countries with the highest adoption of Web3 in the world, although it does not have many projects with a large number of active users. This indicates that Brazilian developers have a vast sea of opportunities before them. In my opinion, missing the chance to participate in an equity free benefits/investment program [without giving up company shares] like this would be a mistake.”
🏛 Policy, Regulation and Enforcement
Deputy Aureo Ribeiro wrote an op-ed in Portal do Bitcoin arguing for asset segregation and tighter Know Your Customer controls in the country’s forthcoming crypto regulatory regime. A new bill that he authored that would require asset segregation, known as PL 4.932, had an outside shot at being voted on last week but remains on the docket.
On the heels of Binance’s US$4.3 billion settlement with US regulators, ABCripto criticized businesses that take advantage of “regulatory vacuums” to operate in Brazil and noted that the local market is still unequal due to the lack of uniform rules for all participants. Among these discrepancies is that local brokerages are unable to advertise using Meta, X/Twitter, Apple or Google, while foreign exchanges have no such restriction. Bernardo Srur, CEO of ABCripto, told Portal do Bitcoin:
“This ban causes great asymmetry in the national market. We believe that all companies have the right to carry out their advertising publications. There should be no privileges for some companies, especially in the media.
What we observe are business models that try to somehow take advantage of interpretations, regulatory gaps or the lack of specific supervision for doing business in Brazil.”
ABCripto announced Banco Topázio as its newest member. The bank specializes in foreign exchange, credit and bank as a service arrangements and has operated as a digital bank since 2015. (Portal do Bitcoin)
Several members of the Chamber of Deputies, including Ricardo Silva and Alfredo Gaspar who both served on the CPI for financial pyramids, indicated that they will seek diplomatic tools to gain access to the US Department of Justice’s investigation against Binance.
“Since Binance's modus operandi appears to be the same in all the countries in which it operates, institutional contact between Brazil and the USA could be very beneficial and help us clarify some of the accusations about Binance and clarify what to do here in the Brazil.” (Portal do Bitcoin)
A proposed law that regulates the issuance of social currencies in Brazilian cities was approved by the Economic Development Committee of the Chamber of Deputies. The bill would task the Central Bank with authorizing the issuance of these currencies. Deputy Caio Vianna, author of the bill, explained his motive for introducing it:
“The success of a currency, including a social currency, depends on the trust of its users. […] Deviations in the management of social currencies put the success of this important instrument of local and social development at risk…One way out of this problem is the adoption of a system immune to fraud. This can be achieved by adopting distributed ledger technologies, such as blockchain, for issuing and transacting social currencies.” (Portal do Bitcoin)
The São Paulo Court of Justice has maintained an order that blocks 30 percent of Fluminense footballer Willian Bigode’s salary as a means of compensating another player who lost funds in a cryptocurrency pyramid scandal called Xland that involved Bigode. (CoinTelegraph Brasil)
