Valor’s Crypto Workshop Recap

On June 2nd, the Valor team hosted its second Annual Crypto Event, in partnership with the Brazilian Central Bank. The event, which took place in the form of a workshop, enabled the fostering of connections within the audience composed of a wide-range of ecosystem players: founders, investors, multilateral organizations, financial institutions and operators, among others. Participants were instigated to address the main issues faced by the Latam crypto community and brainstormed solutions together.

The workshop timing coincided with a crucial transitional period for the sector: the development of a regulatory framework and ecosystem for Crypto in Brazil. This has been enabled by a strong leadership in a country that embraces technology for inclusive development. The Workshop showcased Brazil’s prominent position in the global crypto ecosystem, driven by its sizable market, progressive Central Bank, and abundant talent.

Below are the main insights from each of the sessions we had at the workshop:

The Capital Market’s view on Crypto

The event kicked off with an exciting session led by João Pedro Nascimento, the President of the Brazilian Securities Commission (CVM), the regulatory body overseeing Brazil’s capital market. Nascimento started his presentation by highlighting the recent legal opinions issued by the CVM, summarized by the 40th Guidance of Opinion, which clearly points out how the entity is seeing crypto with the lenses of the capital market, prior to the official regulatory framework publication – that has just been announced this week.

Nascimento also shared that the CVM is actively working towards establishing non-intrusive regulations. In this pursuit, they are working closely with the Brazilian Central Bank. JP concluded his speech indicating that: “CVM is willing to give the necessary rules to bring the crypto economy within the traditional and regulated market.”

During this panel, two Valor Portfolio Companies – Coinbase and Bitso – shared their insights on Nascimento’s overview of the CVM’s crypto policy development and raised some questions around the future of the sector, especially when comparing it to the benchmarks outside the country.

Ideating New Crypto Projects

Our engaging second activity consisted of a workshop led by Brian Brooks, Managing Partner at Valor, and former acting U.S. Comptroller of the Currency, CLO at Coinbase and General Counsel at Fannie Mae.

Intending to harness the experience and knowledge of the participants, Brooks challenged them to brainstorm ideas that they would like to see out there in the crypto landscape and that had not yet been built. The attendees, who were put into multi-disciplinary groups, showcased their enthusiasm by generating a diverse range of proposals. These ideas spanned from leveraging blockchain technology to tackle traffic issues to enhancing the trackability of endowment funds.

Central Bank’s Innovation Agenda

Our third session of the day was a panel with the Governor of the Brazilian Central Bank, Roberto Campos Neto, who unveiled the Bank’s Innovation Agenda. Campos explained that it mainly revolves around achieving complete digitalization of financial intermediation through four essential building blocks: Pix, Open Finance, Currency Internationalization, and the Digital Real. This strategy aims to achieve several important goals, such as promoting inclusion, reducing costs, increasing competition, improving risk control, monetizing data, and fully embracing tokenization of financial assets and contracts.

In his speech, the Governor highlighted the transition from an account-based to a token-based balance sheet as a key driver to trigger many other innovations in the payments and financial rails. By embracing this approach, the banking sector can expect improved risk control, smoother operations, cost savings, enhanced safety measures, and overall greater efficiency.

One of the fundamental roles of digital currency, as emphasized by Campos Neto, lies in revolutionizing the way contracts are engaged. Currently, when making a purchase, individuals must pay another person in an inefficient process. The vision presented is that smart contracts itself could become the catalyst for transactions, facilitating digital and far more efficient dealings once the terms of the agreement are understood.

Deep diving into the Digital Real project, Roberto Campos highlighted the numerous opportunities and challenges it presents. On the positive side, this technology allows saving money on transactions, making financial deals simpler from start to finish, and promoting standardization, interoperability, and transparency. Moreover, the Digital Real promises to foster financial inclusion, offering automatic tools to all individuals with transparent and non-discriminatory execution.

However, the project also faces several challenges, such as scalability, settlement fees, and limited interoperability with existing blockchain platforms and traditional financial services. There is a recognized need for further maturity in the technology, addressing concerns around governance, potential facilitation of money laundering, operational risks, and the risk of poor implementation choices.

Wrapping up his panel, Campos Neto emphasized the central objective of the Bank’s endeavors: the establishment of a more digitally-driven regime of financial intermediation. This ambitious vision aims, among many other points, to foster heightened competition within the banking system and facilitate the efficient utilization of collaterals in credit operations.

Banking panel with Itaú

In the banking workshop with Itaú, Ricardo Marino, Vice-Chairman of the bank, and Guto Antunes, Head of Digital Assets, shared their insights from the perspective of the largest banking institution in LATAM. The discussion covered a range of topics related to the future of banking and digital assets.

One of the key points raised was the concept of a tokenized generation, particularly among Generation X. Tokens have become an integral part of their daily habits, indicating a shift in the way financial transactions are conducted. This highlights the need for banks to adapt to this new reality and embrace decentralized finance (DeFi) as a component of their services.

They also mentioned the transition from Internet 1 (www) to Internet 2 (swipe and use) and finally to Web 3, which focuses on asset ownership, interconnection and decentralized systems. This shift in technology infrastructure has profound implications for the financial sector, demanding a hybrid approach that combines both decentralized finance (DeFi) and centralized finance (CeFi), forming what they referred to as Hybrid Finance (HyFi).

Furthermore, the discussion touched upon the importance of providing control to Generation X in terms of where and when they can trade and settle transactions. This desire for autonomy and flexibility underscores the need for banking institutions to create platforms and services that empower their customers in this regard.

Following the presentation, various groups engaged in discussions on a range of related topics. One challenge brought up during discussions was the coexistence between big financial institutions and crypto players and the opportunity for synergies. Regulatory developments surrounding digital assets in Brazil were a significant point of interest, as participants sought to understand the evolving legal landscape and its implications for the industry. The panel also explored the evolution and potential impacts of Central Bank Digital Currencies (CBDCs), Stablecoins, and the concept of a Real Digital in the banking sector.

Founders Pitching Session

To close the event in the best way possible, we had the pleasure of hearing from Jonathan Levin, co-founder and CSO at Chainalysis, his captivating entrepreneurial journey. His path in crypto began with a conversation around Bitcoin with his friend Tom and eventually led to the establishment and growth of Chainalysis, a blockchain data platform valued at over $8 billion. Jonathan stated that “My entrepreneurial journey is always trying to answer: What are the most important questions of the day that we can provide data to help solve?”.  

Following that, Valor’s Founders went around the audience, doing rapid-fire pitches about their projects and trajectories. Company representatives included Bitso, Caliza, Celo, CERC, Cloudwalk, Coinbase, Credix, HamsaPay, Hashdex, Kanastra, Parfin, Quasar Flash, and Ribon. This engaging session fostered a valuable exchange of knowledge and expertise among the founders and other participants.

The event was featured in Bloomberg, Reuters, Valor Econômico, CNN, Globo and over 250 other media outlets.

We’d like to thank each and every participant for attending, engaging, and sharing their insights on the Crypto ecosystem in Brazil, LATAM, and globally. Thank you to the entire Valor Team and a special thanks to Gunderson Dettmer for the continued partnership and helping make the event a success and inspiring.