&l;p&g;&l;img class=&q;dam-image shutterstock size-large wp-image-758500030&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/758500030/960×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; More Brazilians have cryptocurrency accounts than stock brokerage accounts. Regulators are a few steps behind the Bitcoin growth trend in the country, though investors still have limited options. (Shutterstock)
Brazilians never miss a tech trend. They&s;re rarely ever out in front. But when they follow, they follow for real and stick with it. Within Latin America, look for Brazil to be the cryptocurrency ringleader both on the regulatory side and on the development side. As it now stands, more people are opening cryptocurrency trading accounts in Brazil than traditional brokerage accounts.
Brazil has hopped on the Bitcoin bandwagon. It&s;s not getting off until&a;nbsp;all four wheels fall off.
A year ago, an exchange called Foxbit&a;nbsp;had roughly 100 thousand registered users. Today, it exchanges around 2,000 Bitcoin to and from Brazilian reals&a;nbsp;daily and has a 36% market share.&a;nbsp;They also have 400 thousand registered users out of the estimated 1.4 million that have opened accounts with them and their three main competitors in less than two years&s; time. Compare that to the roughly 600,000 that have stock brokerage accounts and it&s;s plain to see: Brazilians have discovered cryptocurrency. In 2016, Brazilians moved $160 million in and out of Bitcoin. Last year, it hit around $2.4 billion.
&q;For the guys who used to hide dollars under their mattresses, now they are hiding it in Bitcoin,&q; says Eduardo Ferreira, head of international business development for Foxbit in London. &q;It&s;s students buying it. It&s;s 60-year-old bus drivers,&q; he says.
Earlier this year, Brazil&s;s Securities and Exchange Commission, the CVM, banned registered investment funds from trading in cryptocurrencies. They clarified their statement shortly afterward, allowing for indirect ownership. That means Brazilians could invest in funds that had stakes in funds investing in crypto. The rules were supposed to be made clear this month, but as of Wednesday, nothing has been made public.
Like here in the U.S., the disruptors are far ahead of the disrupted and as this market grows, CVM will become more tuned in to its impacts on traditional brokers, banks and — of course — Brazilians frauded by savvy marketers. The market is growing fast, so anything can happen on the regulatory front. For now, there are few opportunities to invest in cryptocurrencies, and most of it is in Bitcoin. But as the market grows and more coins are offered, regulators could follow other countries and push back at a moment&s;s notice.
In the meantime, savvy entrepreneurs are building mini-crypto empires.
Rodrigo Marques is an example of a Brazilian tech entrepreneur who got out ahead of the trend. He now has more money at his fingertips than he&s;s ever imagined.&a;nbsp; In 2015, fresh off a failed Bitcoin-coffee futures venture in Honduras and gainfully unemployed living with his parents, Marques created an algorithm to trade Bitcoin based on market inefficiencies in the global exchange system. His road from an adult living with mom and dad to a &q;crypto millionaire&q; sounds all too familiar by now: some tech guy who knows how to code comes up with this new way to put a 0 and a 1 together and &l;em&g;yadda yadda yadda&l;/em&g;, he&s;s a&l;em&g;&a;nbsp;&l;/em&g;rich guy.
Two years after toiling away on an algorithm and Marques now has 107 employees and runs one of the biggest crypto&a;nbsp;trading firms in Latin America called Atlas Quantum.&a;nbsp; Their strategy is simply to trade off the discrepancies in the Bitcoin market by buying for cheap on one exchange and selling it for a bit more on another one.&a;nbsp; It almost sounds like the kind of &s;genius&s; one would expect from Brazilians, a little bit of &l;em&g;ginga&l;/em&g;, a little bit of &l;em&g;jeitinho&l;/em&g;, if not for the fact many South Koreans and Japanese are doing the same thing.
To serve as an example of the breadth of Brazil&s;s growing Bitcoin prowess, Atlas claims they had just 1,000 clients last June. A year later and they say they have 150 thousand clients. Not all of them have money in the cryptocurrency market at this time. But Marques estimates that around 10% of them do, with an average of $2,000 invested.
&q;I remember back in October 2017 when we hit the threshold of our first million dollars worth of Bitcoin under management,&q; Marques says. They hold Bitcoin for their clients but are not a registered investment firm, or making investment calls on cryptos. &q;Now we have over $35 million under management even with Bitcoin collapsing,&q; Marques says. &q;We are doing arbitrage, only with an algorithm. It&s;s a non-directional trade that makes money on the inefficiencies, and on the volatility inherent in this very new and global cryptocurrency trading system.&q;
&l;img class=&q;dam-image bloomberg size-large wp-image-41829290&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/41829290/960×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; Employees gather around computer monitors as a neon sign reads &q;We are Satoshi Nakamoto,&q; a reference to the unknown creator of Bitcoin, is displayed at the entrance of the Foxbit International office in Sao Paulo. Foxbit is one of the largest Bitcoin exchanges in Latin America. Photographer: Patricia Monteiro/Bloomberg
Earlier this spring, the Sunday evening current affairs program &l;em&g;Fantastico&l;/em&g; aired a segment on crypto, a first for the mainstream mom and pop show. It means that in Brazil, Bitcoin is now a real &q;thing&q;. It&s;s only a matter of time before a Globo &l;em&g;novela&l;/em&g; has a crypto millionaire written into the script.
Like all industries, crypto now has a lobbyist. Fernando Furlan is the former head of Brazil&s;s anti-trust division, known by its acronym CADE. He runs the Brazilian Association for Cryptocurrency and Blockchain. He&s;s this nascent industry&s;s hired gun; hired to get rulemakers and the regulators on the same page. Or to gather the necessary intel to warn of bans and detours, should they arise. It&s;s a blank canvas down there. Very few politicians know what a blockchain is. They&s;ve heard of Bitcoin. Don&s;t you dare say Litecoin.&a;nbsp;That&s;s too much information.
The Central Bank of Brazil, on the other hand, are onto this. They&s;re developing their own blockchain platform.&a;nbsp; The CVM has a working group discussing regulations for investing in crypto assets. Everyone suspects they will follow Japan&s;s lead at best, the U.S. lead for sure.
&q;A few months ago I would say that CVM was negative on crypto and now if you ask me I&s;d say they are neutral about it,&q; Furlan says. &q;Which is good.&q;
And which also puts Brazil in line with their BRIC counterparts. Russia was negative and is now neutral on it, with hundreds of expat Russians working worldwide on blockchain startups or in the initial coin offering (ICO) market. China has banned exchanges and investments in the ICO fundraising mechanism and India&s;s Reserve Bank has also come out against cryptocurrency exchanges. By comparison, Brazil looks borderline bullish.
&l;p class=&q;tweet_line&q;&g;At least two new cryptocurrency exchanges are in the works. Sao Paulo based XP Investments would be the biggest, brand named player in the market, and the first from the traditional securities&a;nbsp;business to enter the space.&a;nbsp; Last November, they actually created a position for an investment analyst of crypto-assets.
Newcomers CriptoHub are issuing their own coin, raising money, and going after Foxbit&a;nbsp;by offering to trade in other top coins.
&q;They can easily be the Binance of Brazil,&q; says Chad Anderson, one two U.S. advisors for the startup and founder of Oceanside Digital Assets in Los Angeles.&a;nbsp; Binance&a;nbsp;issued their own coin as a utility token used for discounts on exchange fees.&a;nbsp;CriptoHub hopes to be the go-to exchange for Latin American startups that eventually hop on the ICO bandwagon. The ICO market is new in Brazil. But if the past is any guide, Brazil will adapt to that part of the fundraising business quickly. &q;As global mass adoption (of crypto) accelerates, I want to have a foothold in Brazil,&q; Anderson says.
If it does, crypto&a;nbsp;will inject new life into Brazil&s;s fairly small startup market. There are around 150 new companies building blockchain platforms for education and fintech&a;nbsp;projects. The two products — blockchain and cryptocurrencies — don&s;t always go hand in hand. But where there is Bitcoin there is a blockchain developer somewhere. And where there is a blockchain developer, there is a whole host of companies looking at what this web 3.0 means for their industry.
Micro venture capital firm Bossa Nova Investments is working with Tokenizo out of Miami to bring ICOs to Brazilian startups, some of them in the blockchain space.
&q;Crypto is turning everyone into an investor,&q; says Fred Wilson, a partner at Urban Square Ventures, one of the firms that backed CryptoKitties, Coinbase, Soundcloud and&a;nbsp;Foursquare to name a few of its biggest hits.
Furlan thinks the same holds for Brazilians.
&q;It&s;s easy to understand why so many are interested in it,&q; he says. &q;This is a nation of lower- and working-class income people and they don&s;t have stock brokers. They have all heard about how this thing called Bitcoin is making people rich.&a;nbsp; Crypto is introducing a whole class of people in Brazil to investing.&q;