Brazil’s brokerage plans to introduce OTC BTC trading

May 15, 2018


Brazil is the largest economy in Latin America with a GDP per capita of $10,220. It has a large population and a lot of wealth. Cryptocurrency trading has become very popular in the recent months. And the largest Investment broker firm, XP Investimentos, is reported to be making plans to introduce over-the-counter (OTC) Bitcoin exchange.

According to media reports made in mid-April this year by Portal do Bitcoin, XP Investimentos is behind a new company called XDEX and has injected around $7.5 million into it. XP Investimentos has not made any official announcements on the matter though. The reports are based on the research done by Portal do Bitcoin which made the connection between XP and XDEX.

The story behind XP and the XDEX

It is alleged that XP registered a new company going by the name XP Coin Intermediacao in September 2017. XP went ahead and changed the name of the new company to XDEX in November when the cryptocurrency frenzy was on a high. XP injected $1.5 million then and added another $6 million in February 2018.

A lot about the new cryptocurrency exchange is unknown. However, according to Portal do Bitcoin, a source unwilling to be unnamed said that XDEX was planning to do an OTC market. The new company would be focusing on large fiat and Bitcoin transactions or in other words heavy investors.

Understanding OTC trading

OTC or over-the-counter trading means that a trade will not show up in the order books as is usually the case on exchanges such as Kraken. In an OTC case, XP would act as the middleman connecting someone who wishes to sell a large amount of Bitcoin with a buyer who has a large amount of fiat money.

In an OTC trade, traders can lock in their gains with one big trade. If they were to sell through the normal exchanges, the price could start slipping the moment order gets filled. In the new exchange, XP would take a cut in brokering the deal between the buyer and the seller.

According to Portal do Bitcoin reporter behind the story, Claudio Rabin, the executive at one of the largest crypto exchanges in Brazil told him that XP was already conducting OTC cryptocurrency trades.

XP Investimentos

XP Investimentos has for many years referred to itself as an alternative to traditional banking. In 2015, the firm invested in a new clients recruitment plan with an anti-banking ad campaign. In the campaign, XP used the phrase “desbancarize seus investimentos”, an expression that roughly translates to “unbank your investments”.

Later in May 2017, Unibanco Holding, the largest bank in Brazil, acquired a 49.9% stake in XP for a price of $2 billion. XP has since the coming in of the Unibanco been seen to be overly interested in cryptocurrencies.

In September 2017, XP registered the “XP Bitcoin” brand at the National Institute of Industrial Property. This served as an early indication that the company was planning to open a Bitcoin brokerage. It was only two months later that XP hired Fernando Ulrich, a Brazilian digital currency expert. Fernando came in as XP’s chief economist of cryptocurrency. This was yet another strong indicator that XP was headed towards opening a future Bitcoin brokerage.

Cryptocurrency in Brazil

Brazil is one of the few countries where cryptocurrency regulations are light. However, in December 2017, the country’s central bank and securities regulator warned investors that virtual currencies had no official oversight body in the country.

In January 2018, the Securities and Exchange Commission of Brazil prohibited local investment funds from buying cryptos. The commission added that cryptocurrencies cannot be considered financial assets. Market analysts suspect that now that the largest financial players in the country are getting into the game, regulators might have a better excuse to be harsher on cryptocurrency.