Why Brazil Is the Big Latin American Bet for Global Crypto Exchanges
A cocktail of inflation and devaluation is generating a crypto boom that players such as Binance, Coinbase and Crypto.com do not want to waste.
Amid a crypto boom in Brazil, several global exchanges see the country as Latin America’s main market in 2022.
Binance, Coinbase, Crypto.com and other exchanges’ interest in Brazil has been growing as the region’s largest economy wrestles with significant economic imbalances.
Brazil registered a 10% inflation rate in 2021 and a steady depreciation of the Brazilian real against the U.S. dollar, which pushed the local currency from $0.25 in January 2020 to $0.18 this month.
This article is part of CoinDesk Brasil, a brand-new partnership between CoinDesk and InfoMoney, one of Brazil's leading financial news publications. Follow CoinDesk Brasil on Twitter.
That cocktail of macroeconomic imbalances fed the crypto boom in recent years. In 2020, crypto exchanges began to notice that Brazilian stablecoin traders were quadrupling in number.
Between January and November 2021, locals traded $11.4 billion in stablecoins and almost tripled the total traded in 2020, while bitcoin trading reached $10.8 billion over the same period, according to Receita Federal, the Brazilian tax authority.
Brazilians have incentives to purchase crypto instead of U.S. dollars to hedge against inflation or devaluation. When acquiring foreign currency, Brazilians are forced to pay a tax on financial operations – IOF is its acronym in Portuguese – that ranges between 1.1% and 6.38%. The tax does not apply to stablecoins.
Moreover, the Brazilian Central Bank prohibits locals from saving U.S. dollars in a domestic bank account. To be sure, the monetary authority abolished that prohibition by approving a new exchange rate framework in December 2021, but it hasn’t implemented it yet.
Brazilians also prioritize crypto over other more traditional investments. According to data from the Central Bank of Brazil (BCB), as of August 2021 Brazilians held $50 billion in crypto, compared to $16 billion held in U.S. stocks.
Locals are familiar with digital money, as the country leads the way in digital payments in Latin America. In October 2020, the BCB launched a real-time retail payment system, Pix, which by November 2021 had more than 104 million users – in a country of 214 million – and concentrated more than 70% of total transactions.
In the crypto arena, the BCB plans to carry out the first tests of its CBDC in 2022, while the local senate will discuss three bills seeking to set the rules for the crypto ecosystem in the country.
Binance, the world's largest crypto exchange, has a special interest in Brazil. “It is a key strategic market for Binance, for sure. It is the largest market in Latin America in all metrics and with enormous potential; and it is also very important for the company globally,” the company told CoinDesk in an email.
Over the past three years, Binance has focused on hiring Brazilians to strengthen its support team, the company said. Now, the exchange is looking for a general manager to lead its Brazilian business, according to one of eight job openings it has in the country.
In November 2020, Binance started accepting Brazilian reals through a fiat gateway, which boosted the number of active transacting users by 125% in 2021 compared with the previous year, the company told CoinDesk.
In that same month, crypto exchange Coinbase announced the creation of an engineering hub in Brazil, for which it has nine open positions on its careers page. The company appears to have a particular interest in payment services.
Singapore-based crypto exchange Crypto.com is another heavyweight looking to expand into Brazil.
According to Guilherme Sacamone, Crypto.com’s head of growth in Brazil, the company has been operating in the local market for "a few months" and its fiat wallet is already integrated with the government's payment system, Pix. In addition, Crypto.com launched a Visa debit card in Brazil, Sacamone told CoinDesk.
Crypto.com is also looking for a country manager to lead its Brazilian operation, in addition to strengthening its institutional customer base through hiring a director of institutional sales.
“Latin America is an important region for Crypto.com and Brazil, being its largest market, has become a global priority for the company,” Sacamone said.
Brazil is also starting to attract European exchanges. Bit2me, a Spanish crypto exchange that raised EUR 20 million via an initial coin offering in 2021, plans to land during the first quarter of 2022, Bit2Me's CEO, Andrei Manuel, told CoinDesk.
Bit2Me plans to allow users to buy and sell crypto with fiat and provide crypto to crypto trading. It has a team of 20 in Brazil and plans to hire 20 more employees in 2022 to boost its marketing, compliance, product and support teams, the executive added.
But the fervor for the Brazilian market is not limited to exchanges. The global payments company Ripple considers Brazil the key trigger to growth in Latin America. It is currently looking for a business development manager to coordinate "strategic relationships" that include “payment and fintech companies, financial institutions, and digital asset infrastructure players,” among others.
A regional fight
Regional crypto exchanges already operating in Spanish-speaking markets are also eyeing Brazil. But they face the challenge of competing with Brazil’s dominant local player, Mercado Bitcoin.
Founded in 2014, Mercado Bitcoin is the largest crypto exchange in Brazil, with 3.2 million users. It also raised $250 million in a Series B funding round from Softbank in 2021, making it the first Brazilian crypto unicorn.
Mercado Bitcoin's main competitor in Brazil is Bitso, a Mexico-based crypto exchange that raised $250 million in a Series C funding round that made it the first crypto unicorn in Latin America.
José Molina, Bitso’s vice president of marketing, told CoinDesk that the company plans to become the largest exchange in the country in 2022. Although it did not disclose its customer base in Brazil, Bitso told CoinDesk that its Brazilian business unit grew 97% in the last six months.
Bitso currently has more than 30 job openings in Brazil with the aim of “growing rapidly,” Molina said. The company hired Facebook veteran Vaughan Smith in August 2021 to boost its expansion in the country.
Bitso has more users than Mercado Bitcoin – 3.7 million versus 3.2 million – when accounting for Argentina, Brazil, Colombia and Mexico, which are the markets in which it currently operates.
But the numbers may change in 2022, since Mercado Bitcoin is looking to expand into the Spanish-speaking part of Latin America through acquisitions in Argentina, Chile, Colombia and Mexico, 2TM CEO Roberto Dagnoni told CoinDesk in June.
Bitso is not the only Latin American crypto exchange targeting Brazil. In January 2021, Argentina-based crypto exchange Ripio acquired BitcoinTrade, the second-largest crypto exchange in Brazil.
For 2022, it plans to launch its corporate trading desk, Ripio OTC, aimed at institutional investors and high-net-worth traders, Ripio Brazil's country manager, Enrique Teixeira said. In parallel, the company is working on "various payment products" with Visa Brazil, including a crypto card and several projects with local fintech companies.
UPDATE (1/24/22; 22:50): Corrects the status of Crypto.com's operations in Brazil.
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