The collapse of the FTX cryptocurrency empire may have damaged Brazilian retail and institutional sentiment towards cryptocurrencies. Nevertheless, its impact will not affect ordinary citizens, who will continue to use crypto for cross-border transactions.
Reflecting on the recent crash of FTX, Thiago César, the CEO of fiat onramp provider Transfero Group, said that the exchange’s crash, as in many countries around the world, has damaged confidence around centralized cryptocurrency exchanges and cryptocurrencies in general.
Grupo Transfero is closely linked to the Brazilian cryptocurrency ecosystem and to FTX, as it was the fiat onramp and offramp provider for the exchange and is also the issuer of the Brazilian stablecoin BRZ, which was listed on the now-defunct exchange.
César told Cointelegraph that the exchange’s collapse had removed a “big source of liquidity” from the market, as FTX was in the top three in terms of trading volume.
He also noted that the uncertainty surrounding centralized cryptocurrency exchanges caused a “large outflow” of exchanges in Brazil, with many seeking self-custody – estimating that at least 20% of trading volume has been lost to exchanges. until now.
“Many people are even trying to liquidate their cryptocurrency positions and we just hold money in the bank account”
César noted that the FTX saga will make investing in cryptocurrency a “harder sell” for new investors and traders.
“For the crypto investor/trader, of course. Now it’s a harder sell. If you go to a person who is not an expert in crypto and try to convince them to invest, especially in Brazil – the population has always been very skeptical about cryptos. Now it’s more difficult,” he said.
Nevertheless, notes that for people using cryptocurrencies as a means of cross-border payment or the “internationalization of money”, the collapse of FTX is unlikely to have any impact.
“Much of the cryptocurrency volume in Brazil derives from players who are willing to exchange their local currency for an internationally liquid dollar-denominated asset. So in that sense, the market will not shut down because cryptocurrencies are just lanes for that.” .
In October, a Chainalysis report found that remittance payments and the fight against inflation were two of the most significant drivers of cryptocurrency adoption in Latin America.
Caesar said that the FTX collapse will likely be used by local exchanges “as a lobbying tool” to push for regulations aimed at aligning international exchanges.
César added that these cryptocurrency exchanges had been pushing for regulation in Brazil to “segregate” local and international exchanges, taking away their access to their global liquidity books.
“They proposed that the regulation force, for example, to segregate the liquidity of the books in Brazilian reais from the international books.”
César explained that such regulation would harm international exchanges, since their main advantage comes from international and liquid global books.
In a November 18 report from Reuters, Roberto Dagnoni, the executive chairman and CEO of Mercado Bitcoin said that cryptocurrency laws in Brazil have been “sort of inactive” during the election period, but now they need priority.
“The rules that currently exist have not been applicable to some players, so they can do whatever they want,” he said.
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