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Why Is Brazil the Biggest Latin American Bet for Global Cryptocurrency Exchanges?

Several worldwide exchanges see Brazil as Latin America's primary market in 2022, owing to a crypto growth in the country.

As the region's largest country grapples with substantial economic imbalances, interest in Brazil has grown among exchanges such as Binance, Coinbase, Crypto.com, and others.

In 2021, Brazil saw 10% inflation and a persistent depreciation of the Brazilian real against the US dollar, pushing the local currency from $0.25 in January 2020 to $0.18 this month.

The crypto explosion in recent years has been fueled by a mix of macroeconomic imbalances. Brazilian stablecoin dealers quadrupled in number by 2020, according to crypto exchanges.

Locals traded $11.4 billion in stablecoins between January and November 2021, nearly tripling the quantity sold in 2020, while bitcoin trading hit $10.8 billion over the same period, according to Receita Federal, the Brazilian tax authority.

Brazilians have an incentive to buy cryptocurrency instead of dollars to protect themselves from inflation and devaluation. Brazilians are required to pay a tax on financial operations – IOF in Portuguese – that ranges from 1.1 percent to 6.38 percent when purchasing foreign currency. Stablecoins are exempt from the tax.

Furthermore, the Brazilian Central Bank forbids Brazilians from storing US cash in domestic bank accounts. To be sure, the monetary body lifted the ban in December 2021 when it approved a new exchange rate system, but it has yet to be implemented.

Brazilians also place a higher value on cryptocurrency than on more traditional investments. According to data from the Central Bank of Brazil (BCB), Brazilians had $50 billion in cryptocurrency as of August 2021, compared to $16 billion in stocks.

Locals are familiar with digital currency, since the country leads Latin America in digital payments. The BCB debuted Pix, a real-time retail payment system, in October 2020, with more than 104 million users — in a population of 214 million – and accounting for more than 70% of total transactions by November 2021.

In the crypto space, the BCB wants to test its CBDC for the first time in 2022, while the local parliament will debate three legislation aimed at establishing laws for the country's crypto economy.

Binance, the world's largest cryptocurrency exchange, is particularly interested in the Brazilian market. "It is, without a doubt, an important strategic market for Binance." It is the largest market in Latin America in every metric and has great potential; it is also highly crucial for the firm worldwide," the company said in an email to CoinDesk.

Binance has spent the last three years focusing on employing Brazilians to bolster its support crew, according to the business. The exchange is now hiring a general manager to handle its Brazilian operations, one of eight positions available in the country.

Binance began accepting Brazilian reals through a fiat gateway in November 2020, resulting in a 125 percent increase in active transacting users in 2021 compared to the previous year, according to the company.

Crypto exchange Coinbase announced the formation of an engineering cluster in Brazil in the same month, with nine open roles listed on its careers page. Payment services appear to be of particular importance to the corporation.

A cryptocurrency exchange situated in Singapore Another major player, Crypto.com, is looking to grow into Brazil.

According to Guilherme Sacamone, head of growth for Crypto.com in Brazil, the business has been operating in the country for "a few months" and is presently trying to combine its fiat wallet with Pix, the government's payment system. In addition, Sacamone told CoinDesk that Crypto.com plans to issue a Visa debit card in Brazil, but he did not specify a specific launch date.

Crypto.com is also searching for a country manager to run its Brazilian operation, as well as a director of institutional sales to increase its institutional customer base.

"Latin America is a critical territory for Crypto.com, and Brazil, as the company's largest market, has emerged as a global priority," Sacamone added.

Brazil is beginning to draw European exchanges as well. Bit2me, a Spanish crypto exchange that raised EUR 20 million through an ICO in 2021, aims to launch in the first quarter of 2022, according to Bit2Me's CEO, Andrei Manuel.

Bit2Me intends to allow users to purchase and sell cryptocurrency with fiat currency, as well as supply cryptocurrency for crypto trading. It already employs 20 people in Brazil, with plans to hire another 20 in 2022 to expand its marketing, compliance, product, and support teams, according to the executive.

The enthusiasm for the Brazilian market, though, isn't restricted to exchanges. Ripple, a global payments business, sees Brazil as a crucial driver of Latin American growth. It's looking for a business development manager to handle "strategic connections" with "payment and fintech companies, financial institutions, and digital asset infrastructure players," among other things.

A regional fight

Brazil is being eyed by regional crypto exchanges that currently operate in Spanish-speaking regions. However, they must compete with Mercado Bitcoin, Brazil's top local player.

Mercado Bitcoin, which was founded in 2014, is Brazil's largest cryptocurrency exchange, with 3.2 million customers. In 2021, it also received $250 million from Softbank in a Series B fundraising round, making it the first Brazilian crypto unicorn.

Bitso, a Mexico-based crypto exchange that raised $250 million in a Series C fundraising round, making it the first crypto unicorn in Latin America, is Mercado Bitcoin's major opponent in Brazil.

Bitso's vice president of marketing, José Molina, told CoinDesk that the company aims to become the country's largest exchange by 2022. Bitso told CoinDesk that its Brazilian business segment gained 97 percent in the last six months, while not disclosing its customer base.

Bitso has more than 30 employment positions in Brazil right now, with the goal of "expanding rapidly," according to Molina. In August 2021, the business engaged Facebook veteran Vaughan Smith to help it expand in the country.

When accounting for Argentina, Brazil, Colombia, and Mexico, Bitso has more users than Mercado Bitcoin — 3.7 million vs 3.2 million – in the markets where it now operates.

However, as Mercado Bitcoin is planning to expand into the Spanish-speaking area of Latin America through acquisitions in Argentina, Chile, Colombia, and Mexico, the statistics may alter in 2022, according to 2TM CEO Roberto Dagnoni.

Bitso isn't the only Latin American cryptocurrency exchange aiming for the Brazilian market. Ripio, an Argentine crypto exchange, purchased BitcoinTrade, Brazil's second-largest crypto exchange, in January 2021.

Ripio Brazil's country manager, Enrique Teixeira, stated the company expects to establish its corporate trading desk, Ripio OTC, in 2022, aimed at institutional investors and high-net-worth traders. In the meanwhile, the company is collaborating with Visa Brazil on "a variety of payment solutions," including a crypto card and multiple partnerships with local fintech companies.