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Brazil Central Bank Moves to Follow IMF Crypto Classification Guidelines

The Central Bank of Brazil has adopted the classification of cryptocurrencies being sold or purchased under the International Monetary Fund (IMF) guidelines.

According to the announcement from the Brazil Central Bank, IMF guidelines will now be followed. Cryptocurrencies will be classified as non-financial products and will be classified as goods on its balance sheet.

The external sector statistics methodology to the IMF Statistics Department recommended that Bitcoin and other cryptocurrencies should be classified as produced non-financial assets and should be put under valuables.

The report states, “These assets come into existence as outputs of a production process (i.e., through mining and/or project development) under the control, responsibility, and management of a specific institutional unit using inputs of labor, capital, goods, and services.”

Given that selling and purchasing cryptocurrencies involves the execution of foreign exchange contracts, the central bank considers crypto assets in their export and import statistics. Brazil being a net importer of crypto assets, will contribute to lowering the trade surplus on its balance sheet.

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Brazil Records the First Blockchain-Based Birth Certificate

The first birth certificate recorded on the blockchain was issued in Brazil to Álvaro de MedeirosMendonça.

As reported by Cointelegraph Brazil, Álvaro was one of the first children to have their birth certificate recorded with blockchain technology without the need for a centralized registry office.

Growth Tech, a tech company, in partnership with IBM, invited Álvaro’s parents to the hospital to participate in the project. It was reported that the process of registering his newborn child only took less than five minutes when blockchain technology was used on Growth Tech’s Notary Ledgers platform, which also provides virtual notary services.

IBM’s blockchain leader in Latin America, Carlos Rischioto mentioned that the child registration method takes three stages. The first is the “Live Birth Statement” recorded by the hospital. Second, the parents create a digital identity on the platform and lastly; the information is sent to the notary office, making the certificate official. He also stated that the platform would allow the birth registration office to be more efficient and transparent.

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Banks in Brazil Set to Introduce New Payment System to Rival Cryptocurrency

The central bank of Brazil is looking to provide a 24-hour payment system with a speed capacity of 10 seconds via the use of mobile apps, internet banking, and ATMs. Code named PIX, it is set to directly rival the use of cryptocurrency in the country.

Laying down the gauntlet

As reported by Reuters, the system is expected to be launched Nov. 10, PIX is created to disrupt the means of the transaction from the conventional to the spectacular. The objective is to deliver speedy delivery of funds while reducing the costs of fiats transfers between individuals and business organizations.

The announcements of PIX were made on Wednesday at the launch event for the planned system. Roberto Campos Neto, President of the Central Bank of Brazil, is of the opinion that PIX was created as a response to new digital payment systems such as cryptocurrencies.He stated, “PIX came from a need for people to have a payment instrument that is both cheap, fast, transparent and secure,” Campos Neto said, “If we think about what has happened in terms of the creation of bitcoins, cryptocurrencies, and other encrypted assets, it comes from the need to have an instrument with such characteristics.”

Endless possibilities of PIX

During the launch of the product, director of the Central Bank Financial System and Resolution Organization Joao Manoel Pinho de Mello commented that PIX is supposed to be made accessible by banks to all market participants, payment institutions and other legal entities.

The creation of PIX is set to aid the reduction in cost by limiting the need for physical use of money, as this is one of the ways society generates great cost during the transaction. Numerous benefits that could be possible with the use of PIX include but not limited to; transfer of funds to others, buying a cup of coffee, shop at online stores, or pay any form of a utility bill.

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Following Investigations in Brazil for Crypto Scams, Ronaldinho Faces Arrest for Using Fake Passport

A widely celebrated and popular professional footballer known as Ronaldinho is under arrest for attempting to enter Paraguay with a fake passport. He is an elite in the sport and as of March 4, the star is currently detained and under investigation. This relates further back to his participation in companies fraudulently operating cryptocurrency scams under his name.

The events of the arrest took place at the Paraguay Golf Club where the former footballer was staying. Upon searching the hotel suite, the police found two fake Paraguayan passports under his name and his brothers. When questioned, it was revealed that he visited the country to endorse a community campaign promoting a foundation which supplied medical assistance to children in poverty.

On March 5, the Ronaldinho and his brother left the hotel, to give a statement regarding the case. The prosecutors in Paraguay then issued an arrest warrant for the guilty parties, according to the Mexican news outlet, Milenio 2020. Furthermore, the controversy only adds to the other ongoing investigations being carried in Brazil, relating to his two fraudulent companies applying scams with Bitcoin.

The US Securities and Exchange Commission’s latest investigation into Telegram revealed court documents showing the participation of Russian Oligarch, Roman Abramovich, in the company’s ICO. Details show that Abramovich appeared to have involved himself in the second round known as Stage A in March 2018. Moreover, the sale of Perth Glory FC, an Australian Soccer Club has been put in question as they battle allegations regarding potential buyers with an ongoing misrepresentation case in the UK. In early February, it was announced that the owner may have to let go 80% ownership to London Football Exchange.

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Brazilian Banking Federation President Claims Crypto Cannot Replace Fiat Money

Murilo Portugal, the President of the Brazilian Banking Federation, has argued that cryptocurrencies like Bitcoin and Ethereum are not real currencies. Portugal was speaking at a debate associated with the impact of the digital revolution redefining financial sector. The debate focused on disruptive technologies, how their deployment and use is affecting the traditional financial ecosystem.

Crypto World Under Pressure

While speaking at the debate, Portugal claimed that cryptocurrency does not fulfil any of the three fundamental functions of traditional money. He stated that cryptocurrencies are not valid as a means of exchange, a reserve of value, or a unit of account. He commented, “They are actually called coins but they are not coins, why it is cryptocurrency. They do not fulfil any of the classic functions of the money, which is to serve an account unit, where people can express prices. They do not serve as a mean of payment or as a store of value because the volatility is very high.”

The financial leader explained that the digital revolution is in a wholde different dimension in terms of the world of finance and therefore regulators must dive deeper into studying it. He acknowledged how cryptocurrencies are transforming the insurance, payments, and credit space. He further stated that information (data) and money are becoming equivalent, thus predicting that data would end up being regulated in a similar way as fiat in the future.

The Febraban president revealed that the young generation of Brazil are all jumping on the digital bandwagon. Only 56% of the population has access to the internet while 75% of the economically active population have a mobile phone. Latin American nations hold the largest number of crypto users in the globe. Brazil, Mexico, Argentina, Chile, and Colombia all fall within the top 10 cryptocurrency nations.

Venezuela, Brazil’s neighbor, is increasingly using cryptocurrencies, particularly Bitcoin as a mean of getting money out of the nation. Although Venezuela has been adversely affected by hyperinflation, Bitcoin is not being used as a traditional store of value. Bitcoin is being used as “vehicle currency” to transfer value out of the country. Informal money transmitters are increasingly using Bitcoin to transmit money outside the country. They hold onto Bitcoin, let it increase in value and when a client comes in to send money, they immediately cash it in and convert it as soon as possible to stable coins like the US dollars. The nation’s attempt at a petroleum backed cryptocurrency has failed.

When it comes to financial matters, Portugal is well respected and his words are taken seriously. Besides holding an economic development degree from the university of Cambridge, Portugal served as an executive director of the International Monetary Fund and World Bank.

The Brazilian president is not the only person who thinks cryptos do not have real use and cannot be regarded as real currencies. Aurel Schubert, the former director-general of the European Central Bank, stated that Bitcoin has not future and later or sooner, it will be on display in the Museum of Illusions. Andrew Bailey, the current governor of Bank of England, also mentioned that Bitcoin has not caught on as much as people had expected it to be.

Bitcoin as Virtual Property with Monetary Value

Cryptocurrency like Bitcoin is deemed legal by most jurisdictions across the world. It is regarded as a property with monetary value. Bitcoin serves the needs of users by being a better approach to transmit value from one individual to another. It is revolutionary because it could transmit any amount of value across any border or any distance without the involvement of regulators and intermediaries. It has become reputable by its popularity among people across the world. Although Bitcoin has not successfully evolved into medium of exchange, used in day-to-day life for selling and buying goods, it is frequently considered as a digital gold because of its ability to act as a store of value.

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Brazil Highlights Blockchain Technology as a Digital Strategy Goal

Last week, Brazil unveiled its Digital Government Strategy that highlighted the use of distributed ledger systems and blockchain technology to transform major parts of the economy, especially in a post-COVID-19 environment.

Brazil’s blockchain push

Major takeaways of the “Decree 10332/2020” include the unification of digital payment and financial channels, development of interoperability between legacy systems, and the “transformation” of digital services.

Some major goals, listed by Brazil’s government, include the promotion of [decentralized] government databases, making citizen identification fully digital, and optimizing existing framework.

The decree noted blockchain platforms serve as the bedrock for all goals listed above. In addition, the use of blockchain can enhance trust in governments while introducing verifiable decision making within all critical processes.

The decree noted, “Initiative 8.3. Make, at least, nine datasets available in federal public administration via blockchain solution, until 2022.”

The document called for “initiation” of resources for creating an interoperable Federal Government blockchain network, with relevant digital identification software and a secure algorithm to ensure no lapse in citizens’ privacy.

Countries moving to the blockchain as a preferred tool comes as no surprise. Distributed systems help reduce bureaucracy and corruption while protecting sensitive information and promoting trust.

Taking a leaf from China’s book

However, risks still exist. Blockchain infrastructure is still in its early stages, meaning extensive testing and limited trial runs are required before blockchain-based frameworks are applied for a critical, sensitive solution.

Blockchain systems also tend to be complex. Distributed computing remains a difficult area for software developers, with security, scalability, and network congestion all factors affecting performance.

But Brazil can look towards countries like China, which is currently leading in blockchain-related legal, regulation, technological progress.

The introduction of national standards, as China has unveiled, will help propel blockchain technology in most nations. “Incubation” areas, such as those in Anhui, help developers and investors to share ideas and work related to blockchain, in turn contributing to the creation of scalable and trusted solutions.

Meanwhile, the move is not Brazil’s first foray into blockchain systems. In 2019, as Blockchain.News reported, the country introduced the world’s first birth certificate issued on a blockchain. The country also mulled the creation of a native digital currency, touted a rival to stateless cryptocurrencies.

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Facebook Faces New Hurdles as Brazil’s Central Bank Suspends New WhatsApp Mobile Payment Service

Brazil’s central bank has suspended WhatsApp’s payments feature in the country. The newly-launched system allows users of Facebook Inc’s WhatsApp instant messaging service to send money via chat.

WhatsApp launched its mobile payment services in Brazil in the past week. This was the first time WhatsApp had been able to carry out a countrywide rollout of its payment service in any market.

The central bank stated that it took the decision to “preserve an adequate competitive environment” within the mobile payment space and to ensure the “functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap.”

The WhatsApp fallout

The central bank has also ordered Visa and Mastercard to halt transfers and payments via WhatsApp’s new payment system. If Mastercard and Visa do not comply with this order, then they would be subject to fines and administrative sanctions.

Per the statement, Brazil’s central bank mentioned that it did not have the opportunity to analyze WhatsApp’s payment service before its rollout. The agency said that rolling out the service without previous analysis done by the monetary authority could ruin the Brazilian system in areas of efficiency, competition, and data privacy.

The WhatsApp payment service enables users to transfer funds to local businesses or individuals within a chat, attaching payment in the form of a video or photo. WhatsApp mentioned that it was not charging any fees to users for receiving or sending money but businesses were being charged a 3.99% processing fee to get payments.

WhatsApp has more than 120 million users in Brazil as this is the second-largest market behind India where the company has also struggled to roll out the new payment system.

Facebook started testing WhatsApp Pay in India for the past two years and has yet to obtain regulatory approval to expand the payment service countrywide. Apart from India, which is WhatsApp’s largest market, WhatsApp also has been testing its payment system in Mexico.

A WhatsApp spokesperson stated that the messaging service would continue collaborating with the central bank and local partners to offer digital payments for its users in Brazil using an open business model that would address regulator’s concern on market concentration.

It emerged that WhatsApp rolled out its service in Brazil without requesting authorization from the central bank, as it was operating as an intermediary between financial institutions and consumers.

While others termed the regulator’s decision as an overreaction, some observers mentioned that WhatsApp created a potential risk in terms of privacy and market concentration.

WhatsApp began its operations in Brazil in partnership with Mastercard, Visa, state-controlled lender Banco do Brasil SA, lender Sicredi, and Nubank.

In a separate setback, Brazil’s antitrust watchdog, Administrative Council for Economic Defense (CADE) suspended WhatsApp’s partnership with Cielo credit and debit card operator to process the payments. CADE said that since Cielo is already the largest payment processor in Brazil, a partnership with the largest messaging service could potentially pose market concentration risk.

The central bank’s move comes at a time when the regulator is preparing to roll out its own instant payments system in November this year, a system known as PIX, joining over 980 participants. The WhatsApp spokesperson also mentioned that it was committed to collaborating with the central bank to integrate systems once the PIX becomes available.

Private banks have been cautious about opening clients’ valuable data to tech giants like Facebook. Some executives have identified a lack of accountability and security issues as major concerns if a transaction goes wrong. It is not clear whether Visa, WhatsApp, and Mastercard have already complied with the central bank’s directive.

Central Bank of Brazil Forms a Digital Currency Study Team to Drive CBDC Research Forward

The Central Bank of Brazil is planning the potential issuance of a Central Bank Digital Currency (CBDC) carefully by setting up a research team dedicated to evaluating the benefits of launching a digital format of ‘Brazil real’ currency.

Brazil looks into CBDC issuance and its benefits

The objective of the research and development team for the Central Bank of Brazil is to assess whether the issuance of a CBDC would fit and benefit the natural payments ecosystem already set in place in the country. Also known as Banco Central do Brasil, the central bank has put in a place 12 members dedicated to cryptocurrency and central bank digital currency research.

Speaking up on the matter was Information Technology (IT) Department of Banco Central do Brasil executive, Rafael Sarres de Almeida.

He addressed the fact that China seemed to be ahead in the development of its own CBDC, dubbed Digital Currency Electronic Payment (DCEP), and that China was entering its final testing phase. The Central Bank IT executive also mentioned that many other central banks have actively been researching digital asset benefits for a while now, but this year, many monetary institutions appeared to emphasize the practicality of digital currency issuance, perhaps given the coronavirus pandemic worldwide. On behalf of Brazil’s Central Bank, Rafael stated:

“The subject of digital currencies addressed by central banks has been on the research agenda of many central banks for some time. However, this year, there was a greater focus on a more practical approach.”

Central Bank of Brazil creates CBDC study group

The new group formed to drive central bank digital currency research forward in Brazil is to examine how much money could be saved economically with the potential issuance of a digital form of Brazilian real through a CBDC prototype. The question of whether digital assets would be beneficial for the overall national economy was raised.

The team coordinator for the CBDC research group also mentioned that with a digital currency set in place, this can “facilitate the safe and safe use of money,” referring to the security and efficiency offered by electronic digital coins.

Though a group for CBDC research has been approved and set in place, Rafael said that it does not necessarily mean that the Central Bank of Brazil will jump into the global race against other central banks for digital currency issuance. Rather, the approach that the Brazilian monetary institution hopes to adopt seems to be a more careful stance. Rafael said, “The monetary authority will study the issue and give society a response on the topic.”

Ripple’s financial motives

Recently in May, Ripple Labs and the Central Bank of Brazil had a private talk regarding institutional matters. According to the bank, its president had an online meeting with Ripple CEO Brad Garlinghouse.

Ripple is currently facing a lot of backlash from National Payments Platform Australia, a consortium of major Australian banks who filed a lawsuit against the cryptocurrency company for copyright infringement of the branding of ‘PayID.’

Top Brazilian Meat Processing Company Leverages Blockchain to Reduce Deforestation

JBS, a leading Brazilian meatpacker, has resorted to blockchain technology to prompt the traceability of tens of thousands of cattle it processes daily.

With this approach, the company hopes to shed light on its livestock source following mounting pressure from investors and Amazon activists about getting cattle from illegally deforested lands.

Tracing cattle throughout their lives

The Sao Paulo-based company has been criticized by non-governmental organizations (NGOs) for not being at the forefront of ensuring that it is not supplied with cattle from unlawfully deforested Amazonian lands. Additionally, the Brazilian government has found itself in hot soup from the international community for the severe destruction of the Amazon rainforest.

JBS seeks to avert this problem by unveiling a digital ledger, which will be instrumental in tracing its livestock origin. It also intends to give suppliers the power to monitor individual supply chains in the next five years. The ledger is to be audited by external parties. As per the announcement:

“The new platform will provide an essential layer of information to enable cattle to be traced throughout their lives and ensure any cattle from producers involved in illegal deforestation cannot enter the JBS supply chain.”

Driving the sustainability agenda

Investors have lauded this development as it is a significant step forward in driving the sustainability agenda forward.

Petterson Vale, an agricultural consultant in the Amazon, said:

“The use of blockchain is excellent. It is a great technology. But the important question is where the data is coming from and what is the legal framework behind the cattle transaction data you’re using.”

Blockchain technology is continuously being adopted in the food industry for its transparency and traceability solutions. For instance, the Food and Agriculture Organization (FAO) of the United Nations recently reported that disruptive technologies like blockchain are game-changers in making the global seafood sector more sustainable and profitable.

As a result, this cutting-edge technology can offer fishers more precise weather forecasts and satellite positioning, which will make its operations more predictable, safer, and more accurate.

US Seizes $24M in Cryptocurrencies Tied to Brazilian Investment Fraud Probe

The US Department of Justice (DOJ) has seized $24 million in cryptocurrencies following investigations linked to online investment fraud.

US law enforcers collaborated with Brazilian police in investigations pertaining to a cryptocurrency scam operation dubbed “Operation Egypto.” On behalf of the Brazilian government, the US carried out a seizure order through which $24 million worth of cryptocurrencies, which were held in the United States, were recovered by law officials for its connection to Operation Egypto.

According to Brazilian authorities, more than $200 million was fraudulently gained by Brazilian native Marcos Antonio Fagundes and his accomplices. Fagundes, along with several of his accomplices, were charged for offering unregistered securities and for violating anti-money laundering laws.

According to the official announcement by the DOJ, Fagundes promoted his services as an investor of a financial company through the internet and in person, guaranteeing a profit through virtual currency investments. Following investigations, Brazilian law authorities found that few of the investors’ funds were returned to them and that Fagundes’ return on investment claims were false and exaggerated. Only a small amount of the sum was re-invested in digital assets, as Fagundes and his accomplices pocketed most of the funds.

Several individuals have since been charged in relation to the case.

CipherTrace helps law enforcers fight cybercrime

Recently, CipherTrace blockchain analytics released a comprehensive guideline that could help law enforcement detect whether foul play revolving around cryptocurrencies was at play in that instance.

The report suggested several clues that could tip off investigators on illicit crypto activity. Details that appeared to not be relevant, such as phones, old computers, and random pieces of paper, should not be overlooked, as they may contain seed phrases and private keys linked to cybercrime.