EN | The Corporate Shift Toward Digital Assets | MERGE São Paulo

With that, I'd love to introduce our next panel here. So, we're going to be talking about the corporate shift towards digital adoption. So, we've been talking a lot about banks, we've been talking about stablecoins, we've been talking about payments. Now, we're going to be talking about how companies, uh entities in Latin America, in Brazil are integrating all of these assets into their actual business models, how they're actually using these things. So, we have a great panel here lined up that I'm very proud to be introducing.

Uh so, we have Leandro Almeida of Banco Safra. Welcome up, Leandro. Uh we have Umberto Costa of B3, the Brazilian Stock Exchange. And we have Charles Abolafia of Kai Invest. And thank you for sponsoring, as well.

And we have Tatiana from Pinheiro Neto, uh whom you all know, I'm sure. Uh and as well as ABCToken. Uh and uh so, Tatiana will leave it to you. So, good afternoon. Uh in this panel, we are going to learn about the story behind the entry into the digital market of three uh major players in this industry, uh Safra, B3, and Kai Invest.

Uh so, uh to start with you, Leandro, what did attract uh Safra uh to the digital market? Uh and how uh did you you make such a success entry in this market? Okay. Um so, uh good afternoon to everyone. Uh I think the regulation had a strong uh motivation behind Safra actually making the decision to come in.

Uh it's I think by now it's clear that uh for every financial institution it's important to have uh stablecoin rails ready to be you know uh executed once we have a more mature framework worldwide. And uh the technology is already available. It's a matter of you know testing um understanding a little better the nuances behind uh blockchain rails um and understand how you can actually apply those uh rails and technology over your legacy. So right now I think it's uh it's a racing among the banks for those who will actually comprehend better what this new you know technology is all about and and uh what the regulation actually allow allows you um from a regulatory perspective to uh do on behalf of your clients and also internally how this can um make you more efficient when it comes to FX uh trade finance uh deposits and etc. etc.

Perfect. And uh Umberto, what about your story in B3? Uh what did attract B3 into this new market which is nowadays is not that new anymore. Uh and and how how did you make it such a a success journey uh so far? Good afternoon.

Thank you for the invitation. And it's a pleasure to be here. But the choice in B3 as uh infrastructure uh central infrastructure for Brazil capital markets and and financial market, we think it's a it's a path that uh uh it's more likely ongoing decision and natural and strategic decision, not just answer for hype in the market or react for the market. We think always looking for innovation, looking for a more efficient and think the the technology that's embracing digital assets, it's a it's a good path for us to to follow and and like ask a new market with more accessible, more secure, and more programmable assets. And that you think it we can test new class of assets with secure and like Leon said, the regulatory authority is very important in between because a very regulated one.

Now we have a very very approach with the regulators. It's a Central Bank and CVM and and we talk a lot a lot of the our clients, how can we can help and do something something with this this new new era come to to afford. Perfect. And although big players such as Safra and Bitso can leverage from the experiences that they already have in the traditional market, they also rely from important service providers in this industry. And this is the case of Caio Vaz nowadays.

So Caio, I want to hear from you first, what did make you enter into this market? You have a huge experience in the traditional finance market with international banks abroad. And how you are nowadays helping the traditional players in Brazil migrating to these new digital market. Great. Good afternoon.

It's a pleasure to be here. Pleasure to sponsor such an important event. Pleasure to sponsor such an important event. Next time, we'll put in the agreement that we want air condition. So, let's put this for the records.

Any event, uh we'd like to share our story, very interesting, very similar to to B tree in Safra. We come from a very, very traditional infrastructure triple A. Key Invest today is the largest institutional bank in Cayman Islands. So, for those don't that do not know, the main product of Key Invest is to create the branch and the subsidiary the subsidiary of international banks in Cayman Islands. So, when you start to pay attention at the wire transfer, a lot of Cayman banks have the same address, and this is because the banks in Cayman has two choices.

To open its own physical presence, which takes mind, management, uh deployment of a lot of attention in order to create the necessary regulatory burden to have this branch and subsidiary. But, that's not what banks want. What they want is to have an account in US dollars, trade finance in US dollars. They want to issue a certificate of deposit in US dollars. They're not interested in creating an infrastructure in Cayman Islands, and that's our business.

Key Invest has 60% of market share of the Caymanian banking market, and now comes a very interesting story about cryptocurrency. 2017, like everyone here, we started to understand and learn about it. And I think the big difference between Key Invest and the traditional uh play of infrastructure is that we had a very hard time in the beginning to show this into our board of directors and to our regulator. Uh how did we know how did we decide to go to crypto? So, we heard, of course, there's such a great way to transfer funds and transfer monies without a centralizer, and that's exactly what we do.

I mean, we're a centralizer, we make sure there's a regulatory branch that opens correspondent account. So, we started to see, "Wow, this is very, very impressive." So, the way we did it, uh we tested it in a very interesting way. We basically transfer money from Brazil via BRL through the banking Cayman to to an exchange in London. It was one of the most famous exchange of London, and what's interesting, first we have to, of course, make the close of the effects.

I'm talking about 2017. The money is arrived to Cayman, this is pretty much one day, let's say half a day. Then we had to send the money when you went to the exchange to a payment company, which I never heard before. And I was one and one day and a half praying for the money to appear in the exchange, and thank God the money appeared exchange. Two days, without any reliability, the money come to the exchange.

Now, the way back, that's what brought us to crypto. We basically bought at the time there was no stable coin, so we we bought a BTC. We transferred to the wallet of the Brazilian exchange right away, even though it was not confirmed, we could see that basically the transaction was already public to everyone. Within a couple of minutes, it was confirmed with 100% reliability. We sold the BTC, we transferred the money back to the same account that started 2 days before.

When we saw that, crypto was a way to transfer a percentage of the cost of the traditional rails with reliability 100%, even better than the traditional. I was one day and a half without knowing where the money was, so this was public blockchain. And the most important, and that's what a lot of institutions now is understanding in a very compliance way. We can track from the beginning of the creation of this cryptocurrency. For us, it was very obvious.

Uh then answering the second question, Tachi, we basically scaled this was kind of a report. I scaled the board of the directors, which I was the CEO. And they said, "No, you know, we're already leading like this and and that's why I'm very impressed about B3 and Safra within other members of of this of of this conference is that we fought we fought a lot. They said, "No, this is going to be risky. Cryptocurrencies are associated to fraud, to pyramid, to everything that you can imagine, but not everything nothing is good."

And they shut it off. They say, "We're not pursuing. We're systematic banking Cayman Islands. Let's continue doing what we're doing. We're growing."

Uh and we said, "Fine. Let's continue growing uh as a group." I scaled this up to the shareholders level, and we decided to make a spin-off. So, we actually did a spin-off from the bank. And the good news is we took all the intelligence of compliance, audit, controller, all the governance to create Cain Vest Crypto.

And this right away because of the government because of the governors became a very solid place to buy liquidity because it was safe. Uh it was complied, and it had all the basically the questionnaires that the the type of the clients, which are banks, uh they were looking for. So, today we're basically doing the same uh We represent only in Brazil 23 banks. So, we're talking to to the CEOs, treasuries, compliance officers to teach them on the migration. I'm not talking about of of course of the big banks, which already first comers, but I'm talking about the big adoption.

So, I see a lot of future here for crypto market in Brazil. That's Great. Great story. Um and now we are living a very important moment for the virtual asset industry in Brazil. Uh we just had the new regulation of the Central Bank entering to effect.

We have until October for both financial institutions and the native companies of this industry to either communicate Central Bank or apply for the license with the Central Bank to officially become regulated entities uh in Brazil. But we already have a new regulation in force, which is a very different situation from what we had many years ago. So, uh briefly story in the case of Pinhão Neto, we started working with crypto companies back in 2015. Uh crypto exchange asked our help because at that time there was a a bill of law aiming at criminalizing crypto in Brazil. Uh and then we start to study.

We went to the Central Bank. Central Bank said, "No, this is not something that we we want to regulate. It's not something that uh we we want to incentivize in Brazil." Now, many years after many things are different. Uh but we started working with the companies, learn about, and we truly believed that that was the future.

So, it's very uh it's very good to be living this new moments now. And I I wanted to hear from you, Leandro, in this new moments that uh we are living, how do you see the impact uh of the new regulation uh into this industry and the new uh challenges and opportunities that we have now in the market? Um well, I'll try to speak from uh my angle. Uh you can give some thoughts over, you know, regulatory aspects of it. But, uh I understand the regulation as it as it is right now allows banks to fully uh serve clients both on on like for individuals and also companies on have having tokenized uh forms of either currency or deposits uh and also FX uh trade finance corridors uh being in a tokenized shape uh as defined as stablecoins, which being uh inserted within the uh FX market uh basically uh provides or enables banks to move all their assets uh based on this new framework if you have the technology on a tokenized basis.

So, what what that means is capital efficiency first. Secondly, you have uh on top of uh capital efficiency uh much better liquidity in terms of uh exchange and uh trade finance corridors where clients that did not have liquidity in corridors such as Asia corridor against USD, now they can do it instantly without having to wait up to five days until the transaction is completed. So, uh those, in my opinion, are uh so far what the regulation actually allows uh banks to fully, you know, uh do and and and serve their clients. Uh and on the stablecoin side backed by uh BRL I think there is still things to be figured out. We have a project uh uh a law still to be passed, um which is under discussion, where it's going to become more and more clear for stablecoin issuers on how they can actually leverage the stablecoin framework on behalf of their clients and in different uh services and products.

So, that's my understanding uh so so far about what the regulation allows us to actually go fully uh in terms of uh uh services and products based on on on stablecoins uh framework. Great. And and Umberto, the the regulation also deals with the more investment aspects of the digital assets. And considering this new regulation, uh on the investment of these assets, what do you see as positive uh effects of the new regulation or maybe new challenges brought by the new regulation? We think you we live in a unique moment.

The the central bank doing amazing job, like you bring more clarity to to to the banks, to large banks, and and enter this new market. We were in between. Uh you a lot of uh learning curve. We start with uh familiar instruments, like uh BDRs, ETFs, and OTC derivatives, then go to the uh familiar future. That's a huge success.

I mean, the risk management, that's it's it's a good for the markets. And we are we are learning and starting to to accelerate. We our position uh in the market is to talk if if every banks and see how our collaborative we can build we can be in this market. We are going to launch our stable coin BR a stable coin in beta this year. Our tokenized tokenization platform that's we already have uh uh digital hub.

It's uh it's a B2B like crypto as a service platform. We think all this together we can now talk in a 24/7 settlement. We can talk a lot of improvement in the market and the the regulator. It's a it's always uh very very difficult to to implement this this tran- transitions of the market and to connect new markets and legacy and you you you know a new technology with with all the the settlement to have today, but we think it's uh it's it's a on on path to accelerate to end more institutional market. Now we think now then the big players is coming now with the the assets and and the the brokers and the hedge funds will start to to feel more clarity and the market is going to shape in a very new form.

Great. And for all this innovation to to happen uh Charlie that it's essential to have uh liquidity provision in the Brazilian market. We know that the biggest part of the liquidity in the crypto industry still comes from abroad. And how do you see uh the uh how is uh kind of actually supporting uh the the players in this industry in in this journey and how do you see the impact of the new regulation uh to kind of actually as an essential service provider for this industry. Perfect.

So, first we're very happy that the regulation came. I remember we remember long hours Tatiana and Piero Neto, which was very important step for us to get into crypto, but when you don't have regulator, you have to become the regulator. I would say 70-80% of our time was qualifying counterparties. Very, very few qualified. So, the way I see it now that we're finally regulator, we we can take this burden off us, okay?

Now we have a good and serious Central Bank and CVM, everyone looking at it, and that allow us to take the noise out of the market. When you deal with crypto, you of course you deal with with innovation, you deal with a lot of good stuff and good efficiency, but you also deal with some bad stuff. So, we as liquidity provider, one of our biggest worries, and that's I used to repeat and repeat to our team, is one transaction to take the whole cards off. And this never happened, of course, but also because of we screen so much our clients that we had very few clients. But the clients we had, there's no news they're going to be regulated.

So, whoever qualified to be a Caixa Invest regulated client, today they are ready for a VAS or they are already banks, so they're already ready before and they have basically all the infrastructure, which is the case of many institutions which are here today. But uh what's really uh our excitement about the industry is that we can finally be safe and sound so we can focus on innovation and efficiency. It's Well, we are almost ending our time here. I just want to open for final remarks from starting with Leandro. Uh I think just to emphasize the importance of having players like B3 and Caixa Invest, I consider Caixa Invest nowadays as a main infrastructure liquidity provider for this new entire market that's being opened up.

Uh B3 has been done a great job on how they can actually leverage the whole their whole infrastructure and pivot on in a way that banks can serve themselves in this new whole industry. So, I think it's an ecosystem uh you know uh thing rather than who is going to win this race. Uh it's rather collaboration than competition in my in my view. Uh and I will finish with this with this. I just want to to thank you in the name of B3 for the invitation.

And uh like Leandro said, it's has to be a collaborative to to can move forward. Now, we have a a lot to do. Have more have more ask than the answer. Now, we have a uncertainty, but you think uh the regulator put us in the in the right path. And now, just we have a uh a new road to play.

We have another another another agents in the market that we have to to deal off and and talk and then and and come on the common ground. And we think uh it's it's all to it's a very very new perspective. And we are very very anxious and uh we think it's uh it's a good for the market. I'll finish my words saying it's an honor to be in a panel with companies such as Banco Safra, B3, and Pinheiro Neto. And I'll explain why.

Those are centenary companies, literally. That they have the game won. And they didn't have to do it, and they did it. So, Banco Safra is the first bank that created a stable coin dollar today everyone is talking about, but they actually did that the number one. It will always be Banco Safra.

Uh B3 is pretty much a monopoly. They didn't have to do it, but I saw how they struggle and they created the B3S Digitais with with basically Beto Eduardo, all his team. And I'm honored basically to be in this panel with the company that even though had everything not to do it, did it. And finally with Tatiana from Pier Neto that come from this very very established company that say maybe you touch crypto is going to be bad for you and they also did it. So, thank you very much.

I also thank the The Merge team for organizing such a nice event in Brazil. Thank you. I just want to thank you.