Brazilians have invested more in cryptocurrencies
bitcoin cryptocurrencies brazil

Brazilians have invested more in cryptocurrencies

Before crashing by around 70 percent in 2018, Bitcoin – the world’s most popular cryptocurrency – experienced an off-the-charts valorization, peaking at USD 20,000 in December 2017. The “Bitcoin frenzy” that took over the world also enveloped Brazil, as local exchanges observed a major rise in turnover and clients amounted to over 1.4 million people. The “cryptomarket” has pushed young middle-class men into quitting their jobs and dropping out of college, planning to get rich and retire within six months, thanks to Bitcoin.

There is no question that in Brazil, cryptocurrencies have found a positive environment in which to flourish.

Four exchanges take the largest chunk of the local market: Foxbit, Mercado Bitcoin, Negocie Coins, and Bitcointoyou. However, according to Ricardo Rochman, a professor at Fundação Getulio Vargas, a think tank, another 15 smaller exchanges complete the market, gathering around 3 million investor accounts. That doesn’t necessarily give an idea of how many individual people are investing, as one client can own more than one account.

</span></p> <p><span style="font-weight: 400;">Either way, there are more people trading cryptocurrency in Brazil than trading on São Paulo&#8217;s stock market, which has roughly 650,000 registered investors. Almost half of the records in the cryptocurrencies market are taken by Foxbit and Mercado Bitcoin. Annual turnovers of both companies have skyrocketed in 2017, reaching a total of BRL 8 billion.</span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5868" src="" alt="bitcoin trading brazil" width="1024" height="512" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">Brazil&#8217;s cryptomarket has grown substantially since 2016. Investors have become more aware of the local exchanges and the momentum (the speed at which the price for a particular asset is changing) was crucial to the appreciation of cryptocurrencies.</span></p> <p><span style="font-weight: 400;">Lately, though, the market hasn&#8217;t been flooded with good news. Several countries, including China and Thailand, have restricted the trading of cryptocurrency. Moreover, the appreciation of virtual currencies has declined after hacks in several exchanges. Just one month ago, South Korean company </span><a href=""><span style="font-weight: 400;">Coincheck</span></a><span style="font-weight: 400;"> lost GBP 28 million after an attack. Google and Facebook have also banned advertisements for financial products associated with cryptocurrencies. Facebook partially lifted this block in the last week of June, allowing </span><span style="font-weight: 400;">advertisers who undergo a vetting process.</span></p> <p><span style="font-weight: 400;">&#8220;Investors had been active </span><span style="font-weight: 400;">because of the momentum, but we must remember many of them are not so experienced. That&#8217;s why negative news or rumors push them away,&#8221; says Mr. Rochman. For Foxbit’s CEO João Chanhada, advertising restrictions help protect investors from scams, but also prevent honest companies from reaching wider audiences. </span></p> <p><span style="font-weight: 400;">Foxbit’s newly-formed marketing department was launched just prior to Facebook&#8217;s and Google&#8217;s restrictions, therefore the company hasn’t invested much in ads. Mr. Chanhada, however, hopes that Google follows Facebook’s decision to lift some of the barriers.  </span></p> <h3>Who is Brazil&#8217;s average cryptocurrency investor?</h3> <p><span style="font-weight: 400;">Brazilian investors have a more speculative profile and embrace innovation in the finance market, in Mr. Rochman’s opinion. In December 2017, Ilan Goldfajn, the president of the Central Bank, called </span><a href=""><span style="font-weight: 400;">cryptocurrencies</span></a><span style="font-weight: 400;"> a &#8220;bubble&#8221; and compared them to pyramid schemes.</span></p> <p><span style="font-weight: 400;">Mr. Chanhada outlines that in the last two years, aside from early adopters, geeks, and libertarian activists in general, investors coming from traditional markets are also interested in Bitcoin (which dominates 95 percent of the market): “They are between 35 and 50 years old, and are already putting their money in stocks or fixed-income investments. Our clients see Bitcoin as another opportunity to vary their portfolio.”</span></p> <p><span style="font-weight: 400;">To face the typical volatility of the market and increase their number of clients, these exchanges are betting on finance education. “Last year, we launched Foxbit Education, a course that aims to increase knowledge about cryptocurrencies, so we can have more conscious investors. In 2018 so far, all of our new investors have taken the classes before joining us. It shows they want to study and be confident to make decisions,” says Mr. Canhada. </span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5870" src="" alt="bitcoin value brazil" width="1024" height="546" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <h3>Uncertainty remains on regulation front</h3> <p><span style="font-weight: 400;">As the market continues to grow at a fast pace, regulation becomes more and more necessary. In Congress, bill 2303/2015 makes a generic suggestion to “discipline payment arrangements based on air miles programs and cryptocurrencies.” </span></p> <p><span style="font-weight: 400;">Members of the Brazilian Congress still lack knowledge on the matter &#8211; which might explain why they equated it to air miles programs in the first place. Lawmakers generally rely on public hearing sessions held by Congress to improve bills. Some of them took place last year, bringing together members of Brazil&#8217;s Central Bank, the Securities and Exchange Commission (CVM), and local exchanges. This year, a special committee was created to deepen the debate in the lower house. </span></p> <p><span style="font-weight: 400;">In the meantime, the biggest exchanges in the country are gathering in associations. For now, there are two of them: the Brazilian Association of Cryptoeconomy (ABCripto) and the Brazilian Association of Cryptocurrencies and Blockchain (ABCB), both launched in April. </span></p> <p><span style="font-weight: 400;">“Together in associations, exchanges will take their suggestions to the Central Bank and to the Commission. It’s easier for federal institutions to discuss issues with associations than with each exchange separately. It will help to organize the market’s growth and to make investors feel safe and confident, for they will know the exchanges better, and then pick them easily. The associations’ relationship with the Central Bank and the CVM will also permit them to schedule public meetings to discuss proposals for the regulation,” explains professor Ricardo Rochman.  </span></p> <p><span style="font-weight: 400;">Foxbit’s CEO, João Canhada, outlines that although there is no formal regulation in Brazil, it doesn&#8217;t mean the market is a no-mans-land. “Brazilian regulation entities, such as the Central Bank and the CVM, have already said they are following our market very closely and I believe they are going to propose some rules soon. Moreover, Foxbit already follows the good practices of the finance market, such as anti-money laundering policies,” he states.</span></p> <p><span style="font-weight: 400;">Mr. Canhada, however, outlines that self-regulation is their goal. Luiz Roberto Calado, chief-economist of Mercado Bitcoin exchange, echoes the lobby for looser rules: “We support a non-restrictive regulation that allows us to explore technology at its highest potential, so we can build innovative solutions and services. This market is maturing in Brazil. When we have a regulation I think we will be able to clearly analyze the national context and its perspectives.” </span></p> <p><span style="font-weight: 400;">Mr. Calado says some Brazilian entrepreneurs prefer to open their companies in countries where the issue has already been tackled, such as Germany and Japan. But he thinks there is still a lot of room to grow in Brazil and the national market is developing well so far.   </span></p> <p><span style="font-weight: 400;">According to Foxbit’s CEO, although Brazil is not taking the lead in the regulation debate, nor following closely what is going on around the globe, the country is a friendly environment for cryptocurrencies: “We have a fair level of freedom as entrepreneurs, and we don’t deal with the severe restrictions that could have come from a harder regulation.”</span></p> <p><span style="font-weight: 400;">But some companies, especially those seeking to do ICOs (initial coin offerings), are looking for alternatives, especially countries that already have a regulatory framework, such as </span><a href=""><span style="font-weight: 400;">Switzerland and Estonia</span></a><span style="font-weight: 400;">. Recently, a mission trip organized by the Swiss Embassy in Brazil took investors and entrepreneurs to the European country in order to attract Brazilian companies and talents. </span></p> <p><span style="font-weight: 400;">While authorities still struggle to find a regulatory model, cryptocurrencies entrepreneurs will look for ways to flourish outside of Brazil.

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MoneyJul 13, 2018

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BY Maria Martha Bruno

Maria Martha is a journalist with 14 years of experience in politics, arts, and breaking news. She has already collaborated with Al Jazeera, NBC, and CNN, among others. She has also worked as an international correspondent in Buenos Aires.