Brazilian institutional and retail sentiment toward cryptocurrencies may have been harmed by the collapse of the FTX crypto enterprise. However, it won't have an impact on regular people because they will still utilize cryptocurrency for international transactions.
Thiago César, CEO of Transfero Group, a company that offers fiat on-ramps, commented on the recent collapse of FTX and said that, like in many other nations, the loss of the exchange has harmed confidence in centralized crypto exchanges and crypto in general.
Transfero Group is related in closely with the Brazilian crypto ecosystem and FTX since it was the fiat on-and-off-ramp supplier for the exchange and is also the issuer of Brazilian Stablecoin BRZ, which was listed on the now-defunct exchange.
Given that FTX was among the top three exchanges in terms of trading volume, César claims that the exchange's demise eliminated a "major liquidity source" from the market.
He also mentioned how Brazilian cryptocurrency exchanges had a "huge outflow of funds" as a result of the uncertainty surrounding centralized exchanges, with many considering self-custody. According to his estimates, at least 20% of trading volume has been lost on exchanges thus far.
“A lot of people are trying to even liquidate whatever positions they have in crypto and we just hold money in the bank account.”
For new investors and traders, César remarked that the FTX scandal will make cryptocurrency investments "harder to sell." He further stated:
“For the crypto investor/trader of course. It’s a harder sell now. If you go to a person who is not crypto savvy and you try to convince him to invest, especially in Brazil — the population has always been very skeptical of crypto. Now it's harder."
He does point out that there won't likely be any effects from the FTX crash for those who utilize cryptocurrency for international payments or the "internationalization of money".
“A lot of the crypto volume in Brazil derives from players that are willing to exchange their local currency into an internationally liquid asset denominated in dollars. So in that sense, the market will not die down because crypto is just rails for that.”
Remittance payments and the fight against inflation were two of the major factors influencing the spread of cryptocurrencies in Latin America, based on reports for the month of October.
According to César, local exchanges will probably exploit the FTX failure as a political negotiating chip to advocate for legislation that would regulate foreign exchanges.
César continued by saying that these cryptocurrency exchanges have pushed for legislation in Brazil to "segregate" domestic and foreign exchanges by denying foreign exchanges access to their global liquidity books.
“They were proposing that regulation would enforce for example, that liquidity on the books in Brazilian reais be segregated from international books.”
As their key competitive advantage derives from liquid, worldwide global books, César stated that such legislation would harm international exchanges.
Roberto Dagnoni, the executive chairman and CEO of Mercado Bitcoin, claimed that Brazil's crypto regulations had been "sort of dormant" throughout the election time but that they now need attention. He further added:
“The rules that currently exist have not been applicable to some players, so they can do whatever you want."
