Brazil’s crypto industry could be a litmus test for US regulators

Brazil’s crypto industry could be a litmus test for US regulators

The largest Latin American country to implement a cryptocurrency regulatory framework, Brazil set another milestone when its largest brokerage firm, XP Inc. launched a crypto trading platform for its 3.6 million clients.

The platform, called Mynt, allows users to trade BTC, ETH, SOL, DOT and ADA with a minimum investment of about $20. Brazil is the 7th largest country in terms of crypto adoption, with roughly 16.6 million or 7.7% of its population currently owning cryptoassets according to data from TripleA.

We spoke to Jonathan Pearce, Senior Quantitative Researcher at Kronos Research, to discuss the significance of this recent development in relation to worldwide adoption of cryptocurrency.

"With both BTG Pactual and XP launching crypto trading platforms for retail investors, there is clearly a strong demand for safe and easy access to crypto trading in Brazil. Given the large decline in the value of the Brazilian Real vs the US dollar over the past decade, it’s not surprising that cryptocurrencies are of interest to many people in Brazil, and I would expect this demand to continue,” Pearce said.

"The participation by two of Brazil's largest banks, as well as the approval of the crypto regulation bill by the Brazilian Senate earlier this year, shows that crypto has become a mainstream asset for investors in the Brazilian market," he noted.

The bigger crypto picture

Brazil is an exciting market to watch because of its grassroots adoption, institutional capital and political goodwill, according to Pearce. More importantly, as the biggest Latin American in terms of crypto adoption, the country is setting precedent for faster and wider adoption worldwide.

“I think consumer demand and governmental regulations are the two key things [to observe]. If big banks in the US or elsewhere see that the Brazilian banks are attracting customers by offering crypto trading products, and they are allowed to do so by governmental regulations, then they will follow,” Pearce said.

Brazil first caught the attention of crypto exchanges in 2020 when Brazilians grew interested in stablecoins, amid the decline in the value of the Real vs the US dollar. To illustrate, back in August 2020, data from the central bank of Brazil showed that its people had $50 billion invested in crypto, while they invested only $16 billion in US stocks.

Before joining Kronos, Pearce was a Partner and Head of Trading Strategies at Mathisys Advisors, and was a quant strategist for KCG Holdings and JP Morgan. He has a PhD in Computer Science from the University of Southern California, and earned his Bachelor’s and Master's degrees in Computer Science from Massachusetts Institute of Technology (MIT).

Kronos is a cryptocurrency quantitative trading firm that specializes in arbitrage and high-frequency trading. Kronos incubated WOO Network with the goal of providing professional traders and exchanges with improved liquidity.

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