There is no exchange owner in Brazil who does not know Banco Plural. The bank has established as the largest partner of companies in the cryptocurrency area, mainly exchanges, and continues to expand in this market. One of the novelties is that the bank will advise a client in the crypto mining area and providing similar services in the OTC market. In an interview with PanoramaCrypto, the bank partner Willian Yoshihiro tells how the financial group has approached the crypto market and analyzes the current scenario of cryptocurrencies in Brazil regarding regulation. Check out the full interview:
Banco Plural is a bank much more connected to the cryptocurrency market than the traditional banks, having developed several solutions specific to this sector. How was the movement that led Plural to this current path?
The financial group was created in 2009 by the former Pactual partners. The group started as an asset and then, in 2011, we bought the retail broker Geração Futuro. In 2012, we bought Banco Múltiplo. In 2013 we started operating as a commercial bank and from there we started to acquire other companies. We saw the opportunity to move forward also on investments platform and then we decided to group everything under Genial Investimentos.
In 2017, seeing the growth of the cryptocurrency area, we began to act on two fronts: one settled as advisory to ICOs and we bought a minority stake in an exchange called Flow, merely to have a foot within this sector. In the meantime, we saw the beginning of the movement of commercial banks closing exchanges accounts. And then we saw an opportunity to understand and serve these customers by providing banking solutions for them.
And what kind of service did you provide to crypto customers at that time, facing a market still underdeveloped and unknown?
There was a major market deficiency at that time. It took two weeks to identify the customer’s deposit, which means, the customer had to wait two weeks to buy cryptocurrencies in an essentially high-yield market at the time. Seeing this flaw, we developed an immediate deposit identification system and we implemented it first at Mercado Bitcoin. And automatically this served as a concept of security and compliance, similar to traditional brokers. With this, third-party credits were avoided in the account as well as bank-billing deposits, in order to prevent fraud or money laundering.
Implementation of processes with customers
In the cryptocurrencies area, it is necessary to be very careful with the clients who are accepted in the bank, so how does Plural perform such filter to prevent potentially problematic clients?
In 2018, there was a growing arbitration movement and people began to seek us to do the arbitration. Almost 100% of the companies in this business were here. Of course, we started filtering more and requiring more documents and, as a result, we naturally ended up selecting the best customers. Some who settled, came back, others didn’t. We’ve always gotten the best ones. Over that year many exchanges were also created. Also in 2018, we extended our operations, previously restricted to Mercado Bitcoin, starting to expand our market share by providing the system of identification of deposits and instant payments to other players.
That is, you have taken on a role of identifying flaws in the cryptocurrency market and correcting these flaws for the market development…
Our role here is precisely to find flaws and try to solve them. We assume the role of helping an unregulated sector providing all financial services, making the sector as close as possible to the regulated world. As an end, the new exchanges that were created in 2019 were born without the sector’s old problems. Today there are few exchanges that do not use our system. This ends up making us the liquidator of the sector. Therefore any client of any exchange that has to send resources ends up sending it to Plural. The staff likes to compare us with the B3 here in Brazil, preserving due proportions.
We are playing a role here to assist an unregulated sector in providing all financial services to this sector by making it as close as possible to the regulated world.
And then you can identify problems that occur in exchanges…
Yes. We maintain high standards of control. When we notice suspicious information or some nonconformity, we ask for a meeting, we clarify all doubts, we help the partner, but if there is no adjustment and the nonconformities persist we may even terminate the account.
How are the bank’s security processes to prevent fraud and dirty money circulating?
Fraud is an imminent risk throughout the financial sector, and with the crypto segment it would be no different. We have created a process of security verification and communication between banks via exchanges. Today when we identify a fraud case, we’ve created a system of locking resources in bitcoin. That way we manage to recover what was hacked. A new customer on an exchange, for example, would theoretically not be able to buy large amounts of crypto. If this happens, we ask to hold and release in tranches the rescue of crypto acquisition, to earn time for some fraud tracking.
Business expansion for mining and OTC
And is this process evolving?
All our clients stay very close to me and Banco Plural. We are always one step ahead, creating mechanisms and they adopt them. For example, we hired four law firms, reviewed all our processes, and asked our clients to adopt some of these processes. That makes them look at us very positively. And even when they stop being our customers, they’re still close, adhere to our best practices and end up coming back.
What can the market expect from Plural for years to come in the cryptocurrency market?
We recently started looking at the mining world to help a customer. We try to understand the market well to give a complete advice to the client who has an interesting project. We’ve recently helped the Mercado Bitcoin in an OTC project and will continue to help our customers adopting the best processes.
And are there still market failures to be corrected?
There is still a major challenge in verifying the financial capacity of the customers. Today many people operate with resources superior to their own capacity, especially in the world of OTC. As it is still an unregulated market, this is a risk because it is liable to the entry of illicit resources. This is not such an easy problem to solve and depends on the effort of the counterparts to verify it. We contributed via Mercado Bitcoin with the creation of processes, for example. Another segment that doesn’t give me comfort is that of those who operate peer-to-peer, as it is a very risky world.
When the business is unregulated, you should be as conservative as possible.
Stablecoins should be used for foreign trade
How do you see the emergence of stablecoins in this maturing process of the Brazilian cryptocurrency market as a whole?
We are looking at this stablecoins market for the use of abroad remittances, made by individuals. Low-value remittances. Brazil has a very strict central bank with regards to currency conversion, which makes abroad remittances expensive. I believe that there will be a flexibilization of the CB and consequently it can open up a possibility for the world of cryptocurrencies. The bank has been showing a modern way of thinking and should look for ways to implement something towards this end. For example, it has some easing movements going on as the possibility of creating dollar accounts. We are looking at this with some players to see how to make these abroad remittances correctly. One example is foreign companies that come to us to make this feasible. On the other hand, I am against the use of stablecoins for foreign trade.
Because by doing so the customer would be liquidating an exchange operation, right?
In this case it would be currency evasion and tax evasion. That’s illegal. Some people use the rule more boldly, but that’s not our case. When the business is unregulated, we should be as conservative as possible.
Do you think some regulations are coming in this direction?
We do not know yet, but the big challenge is how to make this cryptocurrency framework in the Brazilian foreign exchange market. The sentence that summarizes the foreign exchange sector is that the only currency used is the real and any other currency needs to be converted to real and it must be mandatorily made by a financial institution. There lies the discussion whether crypto is a security or if it is currency. And there also lies the difficulty of regulating such market.
What is the Brazilian Central Bank doing about the cryptocurrency world and what will be the impact on its regulation?
The Brazilian Central Bank is up-to-date on the cryptocurrency market and continues to approach major players. Future regulation will bring standardization in the process and help companies and serious individuals who seek to perform operations correctly.
