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Brazil – An Important Bet for Crypto Exchanges

While the regulatory world proceeds on different and disconnected paths, Brazil represents one of the most attractive markets for crypto exchanges. Several macroeconomic and legal factors are creating an optimal environment for these companies.

This article will provide a general overview of the topic, including the main aspects attracting crypto exchanges’ attention. Finally, we will report the views of some of the world’s leading businesses on Brazil and its future in the crypto universe.

The stablecoin mania

2021 was a challenging period for the Brazilian economy. With a very high inflation rate, the value of the Brazilian real has had a complicated year. Many Brazilian citizens are looking at the crypto sector with interest in such a context.

Official data show the increase in the use of cryptocurrencies in Brazil. It is fascinating to see that the stablecoin trading volume in the country has exceeded $11 billion.

This number appears more understandable when compared with Real’s loss of purchasing power. Economists argue that this drop equals -85% between 1994 and 2021.

Although this decline is part of a long-term historical macroeconomic trend, cryptocurrencies have only recently entered the market.

A crypto-friendly country

Going beyond the country’s economic difficulties, Brazil is moving towards greater acceptance of cryptocurrencies from a legal point of view. As a result, the blockchain sector enjoys a range of more significant incentives than other industries.

It is even more interesting to observe the fiscal dimension of the whole affair. Transactions in digital currencies do not see any type of tax in the country. On the contrary, using foreign fiat currencies is subject to taxation.

Therefore, the country provides more significant incentives to buy cryptocurrencies rather than other fiat currencies. A few months ago, the Central Bank of Brazil (BCB) estimated the crypto assets of Brazilian citizens at $50 billion.

To better understand the importance of this number, it is necessary to observe the traditional financial sector of the country. In Brazil, the current market cap of the national stock market ranges between $900-1,000 billion.

It is impressive to see that the crypto adoption by citizens exceeds 5% of the stock market cap. In such a framework, Brazil’s intentions appear clear:

  • The goal is to exploit cryptocurrencies to reduce the effect of an ineffective economic and monetary policy
  • At the same time, the government probably thinks it is more acceptable for the money to go to cryptocurrencies rather than other fiat currencies.

Brazilian Regulation

After a lengthy discussion, the Brazilian Parliament approved the law 2303/15, which regulates the exchange of cryptocurrencies in the country. However, the approval came from the Federal Congress. And, as is usually the case in Brazil, it will also have to be discussed by the Senate.

If we look at politics, it is essential to remember that on October 2nd Brazilian citizens will elect their president. Looking at the official polls, former President Lula would have an advantage over the current leader of the Bolsonaro government.

Therefore, it is unclear whether the Senate will validate the Congress decision before the elections. Meanwhile, the same Parliament is reforming the entire crypto mining sector, considering the tax exemption for eco-friendly companies.

What are crypto exchanges doing in Brazil?

After deciding to accept Brazilian Reals, the Binance portal looks at the country with interest. As per statements by Binance management, this decision led to a 125% increase in users in 2021.

We can make similar speeches on other operators as well. For example, Bit2Me and Coinbase have recently opened their portal to Brazilian investors. In addition, Crypto.com is starting to provide Visa debit cards to its customers in the country, a significant move that can attract new users.

Brazil crypto – What can we expect from the future?

After a difficult 2021, Brazil entered 2022, knowing that this year could be even more important than the previous one. Much could change between cutting-edge bills and the approaching general elections in Autumn.

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Beyond the political issues, crypto exchanges are trusting Brazil. The progressive crypto-friendly atmosphere in the country appeals to companies and investors. We will monitor the evolution of local political and economic events, evaluating their effects on the crypto industry.

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