Why Brazil is the big Latin American bet for global crypto exchanges

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 grown as the region’s largest economy grapples with significant economic imbalances.

Brazil registered a 10% inflation rate in 2021 and a steady depreciation of the Brazilian real against the US dollar, pushing 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.

Brazilians have incentives to buy crypto instead of US 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 – which varies between 1.1% and 6.38%. The tax does not apply to stablecoins.

Additionally, the Brazilian Central Bank prohibits local residents from saving US dollars in a domestic bank account. The monetary authority certainly lifted that ban by approving a new exchange rate framework in December 2021, but it has yet to implement it.

Brazilians also prioritize crypto over other more traditional investments. According to data from the Central Bank of Brazil (BCB), Brazilians held $50 billion in crypto as of August 2021, compared to $16 billion in US stocks.

Locals are familiar with digital money, as the country is the leader 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 that want to set the rules for the crypto ecosystem in the country.

Binance, the world’s largest crypto exchange, has a special interest in Brazil. “This is definitely a strategic key market for Binance. 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 bolster 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 began accepting Brazilian reals through a fiat gateway, increasing the number of active transaction users by 125% in 2021 compared to the previous year, the company told CoinDesk.

In the same month, the crypto exchange Coinbase announced the creation of an engineering in Brazil, for which it has nine open positions on its career page. The company seems 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 client base by 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,” said Sacamone.

Brazil is also starting to attract European scholarships. Bit2me, a Spanish crypto exchange that raised EUR 20 million through an initial coin offering in 2021, plans to land during the first quarter of 2022, Bit2Me 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 another 20 employees in 2022 to boost its marketing, compliance, product and support teams, the CEO added.

But the fervor for the Brazilian market is not limited to exchanges. Global payments company Ripple sees Brazil as the key driver of growth in Latin America. It is currently looking for a business development manager to coordinate “strategic relationships” that include “payments and fintech companies, financial institutions and players in digital asset infrastructure,” among others.

Local crypto exchanges already operating in Spanish-speaking markets are also looking at 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 by 2022. Although it did not disclose its customer base in Brazil, Bitso told CoinDesk that it Brazilian business unit grew by 97% in the last six months.

Bitso currently has more than 30 jobs in Brazil with the goal 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 could change in 2022 as Mercado Bitcoin looks 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.

For 2022, it plans to launch its corporate trading desk, Ripio OTC, aimed at institutional investors and high-net-worth traders, Ripio Brazil country manager Enrique Teixeira said. At the same time, the company is working on “various payment products” with Visa Brazil, including a crypto card and various projects with local fintech companies.

UPDATE (1/24/22; 10:50 PM): Corrected the status of Crypto.com’s operations in Brazil.