In Brazil, the B3 exchange wants to enter the crypto-currency business in a sustainable way through the launch of a well-known financial instrument: the ETF. This goal was announced by the company’s CFO, André Milanez, during a conference call.
First of all, let us recall the principle of an Exchange Traded Fund (ETF). It is a financial instrument designed to facilitate trading on the market. The particularity of an ETF is that it replicates a stock market index by perfectly following its curve. In the field of crypto-currencies, the launch of a bitcoin ETF is usually a major news event.
In Brazil, ETFs and other financial instruments are already popular
B3 has just announced its intention to develop futures contracts on Bitcoin and Ethereum within 3-6 months. Nevertheless, the first objective is to deploy an ETF for Bitcoin.
There is still some uncertainty as B3 has not communicated on the main features to issue these futures contracts. Thus, the biggest question is which benchmark the Brazilian exchange will choose to issue them. Indeed, B3 could consider either the US dollar or the Brazilian Real.
The company’s choice of exposure to the crypto-currency market is not surprising. Indeed, Jochen Mielke de Lima, B3’s CIO, spoke about crypto currencies in January. During his speech, he announced that B3 had been analysing this market since 2016.
This Brazilian exchange is not a pioneer in this field. There are already 25 investment funds approved by the Brazilian Securities and Exchange Commission. This institution, equivalent to the SEC in the US or the AMF in France, allows these companies to offer different products in the crypto-currency market.
Similarly, B3 already has several ETFs in its catalogue of offerings. Investors can, therefore, trade 11 ETFs allowing them to gain exposure to the crypto-currency market.
B3 aims to make a lasting impact on the Brazilian crypto-currency landscape
B3 used this public communication to unveil several projects related to the crypto-currency market. It believes that it has a certain legitimacy because of the proximity of the crypto market to the traditional stock market.
For example, it wants to make data available to concretely analyse the ins and outs of issuing a state-owned digital currency (CBDC) in Brazil.
In addition, it wants to have a strategic role. B3 claims to be a mediator in the Brazilian ecosystem. Since there are 30 crypto-currency exchanges in Brazil, B3 intends to offer a service that facilitates and standardises operations between these different exchanges.
In this sense, B3 believes it can actively help the entire market to meet the growing demands of users. This is confirmed by the announcement of a potential platform for tokenisation of assets and trading of crypto-currencies.
Finally, the recent announcement of a partnership with IRB Brazil, a Brazilian insurance company, should enable them to launch a reinsurance platform soon that will be based on the Corda R3 blockchain.