Cryptocurrency’s popularity as a means of cross-border transactions has stayed the same despite the fall of FTX, which undoubtedly affected investor sentiment.
Post Collapse Scenario
After the collapse of FTX, New concerns about unregulated digital currencies were raised. Brazilian cryptocurrency proponents are pleading with lawmakers to approve a bill to strengthen regulation of the sector. The law had remained “sort of inactive” during the election season, according to Roberto Dagnoni, the exchange’s chief executive, but it must now take precedence.
Brazilian institutional and retail sentiment toward cryptocurrency may have been harmed by the fall of the FTX crypto enterprise. The public will continue to utilize cryptocurrency for international transactions; thus, its impact won’t be felt.
In response to the recent collapse of FTX, Thiago César, CEO of Transfero Group, a company that provides fiat on-ramps, highlighted that, like many other countries, the exchange loss has affected confidence in centralized crypto exchanges and crypto in general. Brazilian Stablecoin BRZ, traded on the now-defunct exchange, and Transfero Group are closely associated with the Brazilian cryptocurrency scene.
Impact on Liquidity
Given that FTX was among the top three exchanges in terms of trading volume, César said that “the collapse of the exchange has eliminated a “major liquidity source” from the market.
He also mentioned how Brazilian cryptocurrency exchanges saw a “huge outflow of funds” due to the uncertainty surrounding centralized exchanges, with many considering self-custody. He estimated that “at least 20% of trading volume has been lost on exchanges thus far. Many people are even attempting to liquidate any crypto investments they may have, and we merely keep money in the bank account.”
According to César, “the FTX scandal will make cryptocurrency investments “harder to sell” to novice traders and investors. For the investor/trader in cryptocurrencies, sales are increasingly more difficult. People in Brazil have always been quite dubious about cryptocurrencies. Thus, it is difficult to persuade someone unfamiliar with them to invest.”
Impact of FTX Collapse on Cross-Border Payments
César said, “The FTX crash won’t affect those who utilize cryptocurrency for international payments or the “internationalization of money.” Players eager to convert their local currency into an internationally liquid asset denominated in dollars account for a large portion of the cryptocurrency volume in Brazil. In that sense, the market won’t slow down because cryptocurrency is merely a platform for it.”
Chainalysis Report for Crypto Adoption
Remittance payments and the fight against inflation were two major factors influencing the spread of cryptocurrencies in Latin America, according to a report from Chainalysis published in October. According to César, local exchanges will use the FTX collapse as a “lobbying tool” to promote rules targeted for bringing foreign exchanges into compliance.
The cryptocurrency exchanges, César continued, have been pressing for legislation in Brazil that would “segregate” domestic and foreign exchanges by denying access to the latter’s global liquidity books. They said that regulations would require, for instance, that liquidity on Brazilian books be separated from foreign books. Cesar argued that such legislation would harm global exchanges, whose key selling point is the availability of liquid.
Dormant Crypto Laws
Mercado Bitcoin’s executive chairperson and CEO, Roberto Dagnoni, stated, “Throughout the election period, Brazil’s cryptocurrency regulations had been “kind of dormant,” but they now require attention. You can do whatever you want because not all players have been exposed to the present limitations.”
Conclusion
Brazil is one of the top 10 cryptocurrency marketplaces worldwide. The FTX fiasco, according to Fernando Furlan, the former leader of the nation’s blockchain association, could be “a push enough” to approve the law. The law’s stricter reporting requirements may make it more difficult for smaller organizations and so-called “dot com” crypto exchanges to function, but Furlan said this was a worthwhile trade-off.
