Crypto Enthusiasm in Brazil
Grupo XP is launching a crypto exchange in Brazil. It’s the parent company of XP Investimentos (XPI). XPI is the largest independent broker in Brazil. The company has a good footprint in the country, so the move is likely to help crypto traders there.
A Bloomberg report quotes Guilherme Benchimol, the CEO of Grupo XP who explained the reasons for their move. An estimated 3 million Brazilians deal in Bitcoin, whereas just about 600,000 trade in stocks. This clearly shows the growing popularity of cryptocurrencies in the country. Brazilian regulators seem to look at crypto assets positively. Regulators will now allow Brazilian funds to invest in crypto assets abroad, although there will be some restrictions.
There is another positive news for crypto traders in Brazil. A Reuters report states that that the Brazilian antitrust watchdog ‘Administrative Council for Economic Defense’ CADE will probe six banks in the country. The Brazilian Association for Cryptocurrency and Blockchain (ABCB) had complained about these banks. They complained that these banks closed accounts of brokers dealing in crypto. These banks allegedly used their power in the market leading to the eventuality that the antitrust watchdog will probe them. The move might herald a potential level-playing field for crypto traders.
These signal better times for crypto traders in Brazil hence, Grupo XP intends to capitalize on this momentum. They will launch the new crypto exchange named XDEX in a few months. XPI is the largest investment company in Brazil. They offer financial services and resource management. Besides, they are in the capital market. Their headquarter is in Rio de Janeiro. However, the company has a New York branch too.
The Other Side
Grupo XPs’ move is good news for a country with many crypto enthusiasts. Crypto traders will find it easier with a large company running a crypto exchange. The market expertise of the company will certainly help. However, there is the other side.
Cryptocurrencies use public blockchain networks. Modern cryptography and consensus algorithms secure these networks. However, cryptocurrencies are all on their separate networks, and the technology varies. These networks aren’t interoperable hence traders need alternatives to trade Bitcoin for Ether. Centralized crypto exchanges stepped in to fill this void. They hold your coins in their central server. Therefore, you can trade easily. This has one disadvantage though. Hackers love central servers, making crypto exchanges are their favorite targets.
Banks may not be perfect. However, they operate under stringent regulations. They need to maintain transparency. Consumers have legal recourse in case of foul play by banks. There lies the difference with crypto exchanges. They operate like banks. However, they aren’t regulated. Crypto traders have no legal recourse, whether it’s a hack or other foul play. The crypto community will need to remedy this. Perhaps banks could play a role as crypto custodians. Incidentally, Bank of America (BofA) wants to store cryptocurrencies securely. Banks may not like crypto. However, they are learning to coexist.
Given this backdrop, it’s significant that XPI also plans to open a bank in a few months! XDEX will be separate from XPI. Thiago Maffra will lead XDEX and its’ around 40 employees. The larger question is whether Grupo XP plans to bring synergy from their banking operations to their crypto exchange. We will need to wait and watch.