The collapse of the FTX crypto empire may have spoiled Brazilian institutional and retail sentiment toward crypto-currencies. However, its impact will not affect ordinary citizens who continue using cryptocurrencies for cross-border transactions. Regarding the recent FTX crash, Thiago César, CEO of fiat onramp provider Transfer Group, said that, like in many countries around the world, the crash had hurt trust in centralized crypto exchanges and encryption in general. Transfer Group is closely associated with the Brazilian crypto ecosystem and FTX as it was the exchange’s fiat onramp and offramp provider and is also the issuer of the Brazilian stablecoin BRZ, listed on the now non-operational exchange.
César told that the exchange’s collapse had removed a “huge source of liquidity” from the market, as FTX ranks in the top three in terms of trading volume. He also noted that uncertainty surrounding centralized crypto exchanges caused a “major outflow” from exchanges in Brazil, with many seeking self-custody. Estimates at least 20% of trading volume has been lost on exchanges so far, according to the people trying even to liquidate the positions they have in crypto, and we keep money in the bank account.
César noted that the FTX saga would make investing in crypto a “harder sell” for new investors and traders. “For the crypto investor/trader, of course. Now it’s harder to sell. If you go to a non-crypto expert and try to convince him to invest, especially in Brazil: the population has always been very skeptical about its Cryptocurrencies, it’s harder now,” he said.
He notes, however, that for people using cryptocurrencies as a vehicle for cross-border payments or the “internationalization of money“, the collapse of FTX is unlikely to have any impact. “Much of the cryptocurrency volume in Brazil comes from players willing to exchange their local currency for a dollar-denominated international liquid asset. So, in that sense, the market will not die out because that is all crypto is for October,” The Chainalysis report found that remittance payments and fighting inflation were two of Latin America’s biggest drivers of cryptocurrency adoption.
César said the collapse of FTX will likely be used by local exchanges “as a lobbying tool” to push regulations to align international exchanges. César added that these crypto exchanges in Brazil had been pushing for regulation that would “separate” local and international exchanges by depriving international exchanges of access to their global liquidity books, for instance, Brazilian real liquidity would be separated from worldwide real liquidity on the books. César explained that such regulation would harm international stock exchanges since their main advantage lies in liquid global and international books.
In a Nov. 18 report by Reuters, Roberto Dagnoni, CEO and chief executive officer of Mercado Bitcoin, said that cryptocurrency laws in Brazil had been “somewhat dormant” during the election period but now need priority It didn’t apply to some players, so they can do whatever they want,” he said.