Why Brazil is the big bet of global cryptocurrency brokerages in Latin America

RIO DE JANEIRO, BRAZIL – Amid a cryptocurrency boom in Brazil, several global crypto exchanges see Brazil as Latin America’s top market by 2022.

The interest of Binance, Coinbase, Crypto.com, and other exchanges in Brazil has been growing as the region’s largest economy struggles with significant economic imbalances.

Brazil has recorded a 10% inflation rate in 2021 and a steady devaluation of the Brazilian real against the dollar. From around R$4 in January 2020, the US currency has risen to around R$5.50 two years later.

This cocktail of macroeconomic imbalances has fueled the cryptocurrency boom in recent years. In 2020, cryptocurrency exchanges realized that the number of Brazilian stablecoin traders was quadrupling.

According to the IRS, between January and November 2021, Brazilians traded US$11.4 billion in stablecoins and nearly tripled the total traded in 2020. In the same period, Bitcoin (BTC) trades reached US$10.8 billion.

Brazilians have incentives to buy cryptocurrencies instead of US dollars to protect against inflation or devaluation. When purchasing foreign currency, Brazilians must pay financial transaction tax (IOF), which ranges from 1.1% to 6.38%. The tax, however, does not apply to stablecoins.

In addition, the Brazilian Central Bank (BCB) does not allow dollars to be kept in a bank account, unlike in other Latin American countries. The ban was abolished after the sanction of the new foreign exchange framework in December 2021, but implementation still depends on specific regulations.

Brazilians also prioritize cryptocurrencies over other more traditional investments. According to Bacen data, as of August 2021, Brazilians held US$50 billion in cryptocurrencies, compared to US$16 billion in US stocks.

There is also strong familiarity with digital money, as the country leads this segment in the region. Pix registered more than 104 million users in its first year of operation – almost half the population – and concentrated more than 70% of total transactions.

In the crypto-active sector, the BCB plans to conduct the first tests of its central bank digital currency (CBDC), the digital real, in 2022. The Senate, meanwhile, will discuss three bills that seek to define the rules for the crypto ecosystem in the country later this year.

Binance, the world’s largest cryptocurrency exchange, has a particular interest in Brazil. “It’s a key strategic market for Binance, for sure. It’s the biggest market in Latin America in all metrics and with huge potential; it’s also significant for the company globally,” the brokerage told the report.

The exchange said that it has focused on hiring Brazilians to strengthen its local support team over the past three years. Now, it is looking for a general manager to lead its business in Brazil. According to its careers page, there are seven open positions in the country.

In November 2020, Binance started accepting Brazilian real through a payment gateway. According to the company, the measure was responsible for increasing the number of active users by 125% in 2021, compared to the previous year.

That same month, cryptocurrency exchange Coinbase announced the creation of an engineering hub in Brazil, for which it has nine open positions. Considering its careers page, the company seems to have a particular interest in entering the Brazilian payments ecosystem.

Singapore-based cryptocurrency exchange Crypto.com is another heavyweight working to integrate its platform into the Brazilian market.

According to Guilherme Sacamone, head of growth at Crypto.com in Brazil, the company has been active in the local market for “a few months,” already offers integration with Pix, and has launched a Visa debit card in Brazil.

Crypto.com is also looking for a country manager to lead its Brazilian operation. In addition, it is interested in strengthening its institutional portfolio by hiring an institutional sales director.

“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 cryptocurrency brokerage that raised €20 million through an ICO in 2021, plans to land in the country during the first quarter of 2022, said Bit2Me COO Andrei Manuel.

The company is studying allowing the purchase and sale of cryptocurrencies with reals and providing cryptocurrencies for trading digital assets. The executive added that the brokerage has a team of 20 people in Brazil and expects to hire 20 more employees throughout 2022 to grow its marketing, compliance, product, and support teams.

But, the buzz in the Brazilian market is not limited to exchanges. Global payments company Ripple considers Brazil the main trigger for its growth in Latin America. Currently, the company is looking for a business development manager to coordinate “strategic relationships” that include “payments companies and fintechs, financial institutions and digital asset and infrastructure players,” among others.

REGIONAL CLASH

Regional cryptocurrency exchanges that already operate in Spanish-speaking markets are also eyeing Brazil. But they face the challenge of competing with the country’s leading local player, Mercado Bitcoin.

Founded in 2014, Mercado Bitcoin is the largest cryptocurrency exchange in Brazil, with 3.2 million users, the company said in a statement. It also raised US$250 million in a Series B funding round from Softbank in 2021, becoming the first Brazilian crypto unicorn.

Mercado Bitcoin’s main competitor in the region is Bitso, a Mexico-based cryptocurrency exchange that raised US$250 million in a Series C funding round that made it Latin America’s first cryptocurrency unicorn.

Jose Molina, Bitso’s vice president of marketing, said the company plans to become the largest exchange in Brazil by 2022. Although it has not disclosed its customer base in the country, Bitso said its Brazilian business unit had grown 97% in the past six months.

Bitso currently has more than 30 job openings in Brazil as it wants to “grow quickly,” 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 counting the numbers from Argentina, Brazil, Colombia, and Mexico, which are the markets where it currently operates.

But, the dispute may change in 2022, as Mercado Bitcoin is looking to expand its operation to the rest of Latin America through acquisitions in Argentina, Chile, Colombia, and Mexico, 2TM CEO Roberto Dagnoni said in June.

On the other hand, Bitso is not the only Latin American cryptocurrency exchange eyeing Brazil. In January 2021, Argentina-based cryptocurrency broker Ripio acquired BitcoinTrade, the second-largest brokerage in Brazil.

For 2022, the company plans to launch its corporate trading desk, Ripio OTC, aimed at institutional investors and high net worth traders, Ripio Brazil country manager Henrique Teixeira told the report. In parallel, the exchange is working on “several payment products” with Visa Brazil, including a crypto card and projects with local fintechs.