During the pandemic there was an acceleration in this digitization movement: 36% of Brazilians said they had opened some kind of new digital bank account.
The survey also revealed that 57% of Brazilians with internet already have a digital account.
Billionaire Warren Buffett's investment firm Berkshire Hathaway bought a stake in Nubank;
JP Morgan acquired a 40% stake in C6 Bank; and
Banco Inter raised R$5.5 billion in the financial market.
Brazil is the sixth most populated country in the world. Home to roughly 214 million people today, it accounts for almost half of South America’s inhabitants.
Over 60% of Brazil’s population fall under the millennial or Gen Z bracket, with youths aged 15–24 accounting for more than ⅓ of the total population.
Of the whole population, around 70% have regular Internet access and own a smartphone.
We believe that this is a favourable climate to launch a DeFi product. The target market is huge, including millions of young people that use the Internet on a daily basis.
Crypto is known for its popularity among younger, tech-savvy audiences. It’s sometimes described as “Internet money”.
Brazil as a fintech hub
Brazil is South America’s largest fintech hub.
The country’s fintech industry has grown at a rapid rate in recent years, too. According to data from Statista, the number of fintech startups jumped from 244 in early 2017 to 771 in mid-2020 — an increase of over 200%.
Brazil is home to many successful fintech companies, including Nubank. Since launching in 2013, the popular neobank has attracted 34 million customers and hit a valuation of $25 billion. That’s a higher valuation than UK companies Revolut, Monzo, Transferwise and Starling combined.
The success of companies like Nubank highlights Brazil’s appetite for innovation, particularly concerning their own personal finances.
However, the cryptocurrency space currently represents only a fraction of this market today. This has presented us with an opportunity to bring a product to the Brazilian market, combining our expertise in both the crypto and fintech worlds.
Brazil’s economic climate
Brazil is the largest economy in South America and 13th largest in the world, according to the International Monetary Fund.
The country’s Gross Domestic Product is estimated to be around $1.5 trillion.
Nonetheless, Brazil is classified as a developing country. While the GDP is high, it ranks only 83rd in the world on GDP per capita.
Many parts of South America have endured a debt crisis at various points in history, with Venezuela currently experiencing a long-running hyperinflation problem. Though Brazil’s situation isn’t as severe, national debt hit a record high of 90% of GDP in February.
Brazil went through a recession from 2014 to 2016, and the economy has plunged further over the last year as a result of the Coronavirus pandemic.
Inflation is almost 3% today, while lending rates are among the highest in the world. Meanwhile, real interest rates are now negative; several Latin American banks started charging to borrow money amid the pandemic last year.
While Brazil has one of the world’s largest economies, it’s currently facing many economic challenges. The impact of Coronavirus has intensified the situation, with negative interest rates now a harsh reality for Brazilian citizens.
There could be a solution in DeFi. A new economy is growing on Ethereum today, where DeFi users can earn generous yields for interacting with protocols. In DeFi, you can earn interest in the form of tokens and watch your money grow. We intend to introduce Brazil to the magic of DeFi in an easy, safe and fun way.
Brazil’s crypto scene
While Brazil has had economic difficulties in recent years, the cryptocurrency space has seen enormous growth.
Mercado Bitcoin, Brazil’s biggest cryptocurrency exchange, has over 1.5 million users today. Mercado Bitcoin was Brazil’s first major exchange to launch in 2011, but other companies have emerged over the last few years as demand for digital assets grows. Major industry players such as Binance and Huobi also have a local presence.
However, of the fintech startups based in Brazil, crypto accounts for only 2%.
Moreover, the current landscape focuses on only a few crypto assets. Other than Bitcoin and Ethereum, exchanges typically favour assets like Litecoin, Bitcoin Cash and Ripple, which exploded during crypto’s moment in the mainstream in 2017.
To date, Brazil has offered little exposure to projects like Aave, Synthetix or Yearn Finance. Our research indicates that “DeFi” is largely unknown in the country. That means even crypto-inclined Brazilians are likely unaware of the possibilities of the technology, notably the opportunity to capture yields.
With crypto beginning to return to mainstream interest, we predict that the number of crypto projects in Brazil will increase exponentially over the next decade.
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