The Latin American Payments Blog
The rise of the Crypto market: is Brazil next?
The last few years have seen the rise of blockchain and cryptocurrency, and the market in Brazil has followed suit. In fact, Brazil is the cryptocurrency leader in the whole of South America. More people are opening a cryptocurrency account in 2018 than they did a traditional bank account!
This rise in use has made the country one of the most exciting in the world for potential crypto and blockchain products. The country has been ranked by Morgan Stanley Research as seventh overall in terms of the number of cryptocurrency exchanges. This is behind the likes of United Kingdom, Hong Kong, United States of America, Singapore and Turkey.
Who are the crypto users in Brazil?
A report by the Business Administration School of Sao Paulo in 2018 revealed that the average Brazilian crypto user has more than one form of cryptocurrency in their wallet. These users are also predominantly male, with this gender making up an incredible 92% of the overall users.
As you might expect with such a digital product, the vast majority of users in Brazil are young. 40% are between 20 and 25 years old. Whilst 26 to 40-year-olds make up another 40%.
These statistics won’t likely come as a surprise to those with some knowledge of cryptocurrency. We see similar trends around the world. However for Brazil, in particular, 40% of crypto users were earning below the minimum wage. An interesting point to note when thinking about how people earn, store, and spend their money in the country.
Changing regulation could halt this rapid rise
After a few years of rapid cryptocurrency market growth in Brazil, in 2019 the government implemented new regulations. These regulations have led to a sharp halt in the rise.
With new tax laws coming into play in 2019, two large cryptocurrency exchanges were closed. This was after facing heavy fines for failing to meet the new regulations. As there was no dedicated ruling or law in regards to cryptocurrency, these new regulations meant that every exchange made was under Normative Instruction No. 18881,888/19 ruling (Instrução Normativa RFB Nº1888/19. This meant every crypto transaction carried out by a company in Brazil, would have to be reported or result in a fine of up to $1,500.
Many businesses see this crackdown as a way for the government to increase tax revenues. But according to government commentaries on the matter, these measures were actually introduced to help. To help tackle the rising money laundering, tax evasion, and funding of crime that was happening.
Specific guidelines for the cryptocurrency market
Towards the end of 2019, many Brazilian courts also began targeting illegal cryptocurrency investment firms. These investment firms had cropped up and forced their closure. They did this with the aim to improve both the security and the legitimacy of the crypto market in the country.
Despite the initial dip in the market following this legislation. In January 2020 the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) announced that they would be launching a brand new regulatory sandbox that had been designed to help the creation of cryptocurrencies.
These regulations were designed to provide specific guidelines for the cryptocurrency market. They also act as a test for new companies to join the market in a safe and regulated market. The CVM is also planning to adopt further changes to welcome the rise of blockchain technology within the country as well.
They are aiming to launch in 2020. This framework allows the sharing of data and resources that are offered by banks with proven fintech partners. These changes could cause a slight dip initially but are designed to provide fairer regulation and enhanced security. Meaning the cryptocurrency and blockchain industries could take off once again.
Why 2020 could be the perfect time to bring your crypto business to Brazil?
With the crypto market poised to expand once again, 2021 marks the perfect opportunity to join the growing Brazilian blockchain community. With over 210 million people living in the country, there is undoubtedly a huge opportunity. Especially for exchanges and traders to expand their customer base and reach even more people.
There are a number of reputable bitcoin exchanges in the country. These allow users to top up or withdraw their wallets. Leading providers include the likes of Airtm, Local Bitcoins, CEX.io, BitEx, Ripio, Satoshi Tango, Mercado Bitcoin, FlowBTC, and BitCambio that all offer Brazilians exchange services. In certain cities, residents can also top up their crypto wallets direct from an ATM. Sao Paulo for example has two machines that allow users to do so without needing any verification.
In response for growing customer demand for instant payments, the Central Bank of Brazil (Banco Central do Brasil – BCB) announced plans in February 2020 to launch a brand new instant payment system by November. This is the Brazilian Instant Payment Scheme (PIX). Pix allows users to complete peer-to-peer and B2B transactions in under ten seconds. They will be able to manage these transactions via their mobile phone, desktop computers, or even some select ATM machines. The new system will allow crypto firms to join the platform without facing any restrictions from the bank. Giving many citizens another way to work with crypto exchanges.
How to accept Cryptocurrency in Brazil
The number of Brazilians using cryptocurrency is only going to increase. It makes for an incredibly attractive market for any cryptocurrency exchange or crypto wallet company looking to expand their business.
In order to be able to accept crypto, a company will need a digital wallet. This will require certain software to open the wallet from. Then when a customer chooses to purchase via crypto, the software will generate a unique QR code. The customer will then scan this QR code and the required amount is then automatically deposited into their wallet. You can then withdraw this as required like you would with any bank. It’s important to note, that all businesses are willing to go through such hurdles. That’s why businesses that really want to accept cryptos usually hire a payment processor that specializes in taking cryptocurrencies.
Growing your crypto wallet in Brazil
To be a successful crypto wallet in Brazil, you’ll need to take into consideration how people pay for things in Brazil. This is to ensure you’re not missing out on any part of your addressable market. 94% of Brazilians don’t have access to international credit cards, and around 30% don’t have bank accounts. That’s why it’s important to seriously evaluate how you will allow your clients to pay for their wallet top-ups in the country.
By using the services of an established financial institute, such as epag, you can accept local payments. This means you can reach more customers and reduce the taxes you will need to pay.
State-of-the-art technology companies like epag use them to collect payments in the local currency, before then remitting it to a business anywhere in the world. So if you are thinking of expanding your crypto exchange or wallet services, 2021 could be the year Brazil helps you to transform your business.