Latin America - FTX + MXNT \ Grenada \ Geothermal \ Massa \ Pix
Critical Policy Intelligence for Latin America Bitcoin & Blockchain
I hope you are having a great Friday. Thanks again for reading Barracuda Briefing.
In case you missed it, here are the latest Barracuda Insights to keep you up-to-date:
A Switzerland-to-El Salvador bridge forms for Bitcoin capital | 9 November
Brazilian Gabriel Galipolo’s SUR idea gets a Lula. Will it get a blockchain too? | 2 November
In Chile, Congress passed a new Fintech law that will regulate crypto | 26 October
The global financial system is splitting in two and Latin America will choose sides | 19 October
Here is the most critical policy intelligence from this week if you are a Bitcoin, blockchain and/or financial technology professional making important decisions on Latin America.
Contagion from the FTX bankruptcy is unlikely to spread to Mexico’s main exchange Bitso. Daniel Vogel described the custody and stewardship regulations the company implemented and claims they are immune, but we will need to wait and see. It seems that Bitso uses a self-custody service provided by BitGo that enables Bitso to custody at the exchange, if not through BitGo as a third party.
One important area to watch for FTX contagion is Mexico and Tether’s MXNT stablecoin. There is some chatter about Tether’s USDT de-pegging because of exposure to FTX’s sister fund Alameda. That could spill over into its other stablecoins. MXNT showed less than $4,000 USD in daily transaction volume and has a market cap of $998,000 USD as of today.
Nayib Bukele was accused by hedge fund manager Mike Novogratz of holding his Bitcoin on FTX as well. When FTX imploded, rumors swirled that El Salvador’s Bitcoin experiment was going down with the exchange. These rumors are false. El Salvador’s Bitcoin and crypto assets, similarly to Bitso’s case, are held in custody by BitGo through the Central Bank of El Salvador. El Salvador is not directly exposed to FTX.
Shortly after Binance’s CZ flip-flopped on an offer to bail out FTX, Tron’s Justin Sun stepped in to offer billions of US dollars in aid. Justin Sun is also ambassador to the WTO for the Caribbean island Grenada. The island nation aligned with Beijing in 2005 and Primer Minister Dickon Mitchell maintains close ties to the PRC.
Energy developers close to Bukele’s Nuevas Ideas party in El Salvador and Honduras want to develop geothermal energy facilities in El Salvador using Bitcoin. One developer estimates that 10MW will involve $10 million in exploration capex for finding the geothermal deposit and $4mn-$5mn for developing for every 1MW equivalent in geothermal well development. That means 10MW of geothermal would cost miners $60 million plus. By comparison, capex for a standard wind turbine is approximately $1.3 mn in 2022.
Argentina’s Finance Minister Sergio Massa appears to be listening seriously to technical arguments in favor of Bitcoin for Argentina’s economy, including from Kirchnerista opposition figures. Sergio Massa was named minister of finance by Argentine president Alberto Fernandez’ government after a sequence of resignations at the ministry and will speak at the Buenos Aires bitcoin conference this week.
Brazil’s Central Bank Chief Roberto Campos Neto opened the Pix instant payment protocol for other countries to perform a copy & paste policy. Campos Neto and his team have been developing a Digital Real (CBDC) for Brazil as well.
Brazilian Itau, a bank, is preparing to launch a physically-backed Bitcoin ETF with Mike Novogratz’s Galaxy. The Itau ETF means that Brazilian regulations are more favorable to Bitcoin ETFs than US securities regulations, which currently disqualify physically-backed Bitcoin ETFs.
Several Latin American leaders with pro-Bitcoin and/or pro-Renewable Energy postures attended the COP27 climate conference in Egypt. Senator Indira Kempis of Mexico, Vice President Francia Marquez of Colombia and president Gabriel Boric of Chile were notable attendees. They are all of the same generation and some members in these political blocs want to tie the renewable energy agenda to Bitcoin.