This article is from cointelegraph.com.br and the original article can be read here in Portuguese
The association of cryptocurrencies with a financial pyramid scheme is a “specific problem in Brazil”, stated André Portilho, head of Digital Assets at BTG Pactual bank, in a interview with Exame published on Monday, 30.
According to the executive, “financial pyramids are unfortunately part of our history” and are something “much more characteristic of the Brazilian market than of crypto”:
“We had fat cattle, we had ostrich, we had several “fashionable” assets that are chosen for financial pyramids. And this is very Brazilian, even because of the very “volatility” of the Brazilian, who loves a lottery ticket, even better. Outside Brazil very little happens. People don’t fall for that anymore.”
Portilho made the statement in Davos, where in recent days he has been following in person the debates on digital assets, which occupied much of the agenda of the World Economic Forum in its 2022 edition.
The BTG Pactual executive also understands that Brazil is still behind when it comes to debates about the potential of cryptocurrencies and blockchain technology. The debate by market entities and financial authorities in the country is still restricted to crypto-assets as an investment modality, while in other countries the discussion about the potential of digital assets and blockchain technology is already broader:
“In Brazil, you have a lot of discussion about good and bad exchanges, crypto as investment and crypto as infrastructure. In the Forum it was broader. You have much more about blockchain in other industries, in addition to the financial industry. production, sustainability, and, of course, the financial part as well. But the discussion in Brazil is more restricted.”
Regulation is seen by Portilho as something natural and necessary for the development of the industry in Brazil and in the world. In this sense, he believes, Brazil is making progress and the Bill 4401/2021 pending in Congress has the potential to accelerate the development of a broader cryptocurrency ecosystem, giving the country competitive advantages that can bring benefits not only to the sector, but to the economy as a whole.
Among the deliberations of the project, the executive of BTG Pactual highlights the article that provides for tax exemption on the import of instruments for the mining made with clean and renewable energies:
“Everything is going along this line. This is an important sign, and few people are paying attention to it, which could be very important for Brazil, as it could attract a good part of the global crypto-assets industry to the country. Generating jobs, taxes, and contributing to the development of Brazil.”
Portilho predicts that by the end of the year Brazil will have approved and come into force a regulatory framework for cryptocurrencies. Although the procedures still depend on the approval of the PL in the Chamber of Deputies, the seal of the Civil House and the Central Bank, “things are heading towards a quick resolution”, he said.
According to Portilho, the Brazilian regulatory framework is more similar to what is being proposed in the USA, where there is a congressional willingness to regulate cryptocurrencies without hampering innovation, than in the European Union, where cryptocurrencies are under attack not just from European Central Bank (ECB) President Christine Lagarde, but from lawmakers themselves.
Cryptocurrencies in Davos
The BTG Pactual executive highlighted that this year’s edition of the World Economic Forum hosted a “parallel Davos” dedicated exclusively to crypto assets. Outside the official schedule, several industry players held parallel meetings exchanging ideas and information about the industry’s direction in the face of an unfavorable global macroeconomic and geopolitical scenario:
“There are two phenomena that are happening right now. First, there’s a lot of discussion about technology, DeFi, decentralized finance, Web 3.0, which is nothing but crypto allowing the internet to be more open, individualized and impersonal. And, on the other hand, what what is happening in the market as a whole: high inflation, rising interest rates, and probably a worse environment for all crypto companies and fintechs as a whole, as capital is going to dry up a little. Advanced in the field of technology, about what can happen and change, and the other eventually about the “drying up” of abundant capital.”
Since the start of 2022, the cryptocurrency market capitalization has lost $883.2 billion, according to data from CoinMarketCap, which represents a shrinkage of approximately 40%.
However, Portilho believes that such a reduction is primarily due to the macroeconomic situation and the general flight of investors from the so-called risk assets, such as the stock market and cryptocurrencies themselves, than to a structural decline in the industry. Thus, the high correlation between Bitcoin price action (BTC) and the stock market, especially with the Nasdaq Index, tends to be something seasonal. And in the short term this should not change, said the executive:
“As long as interest rates and inflation are high, people kind of get out of everything. They sell their entire portfolio and buy treasuries. But it doesn’t make so much sense that blockchain assets or other cryptos are impacted in this way by interest rates being, due to contamination. When the interest rate rises, it impacts all assets that have cash flow, because you bring them to present value and they fall. Assets such as gold should not suffer this impact, but there is contamination. This is the case of Bitcoin. The question is, is this correlation going to break down in the future? That’s an expectation that crypto folks have. Let’s see what happens.”
As Cointelegraph Brasil recently reported, last week there was a beginning of a breakdown in the correlation between the US cryptocurrency and equity markets. However, it was not type of decorrelation expected by cryptocurrency investors, because while the Nasdaq Index closed the trading session up 3.1% on Friday, the 27th, Bitcoin consolidated the new consecutive red weekly candle, recording losses of 2.7% in the period.
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