Brazil’s Largest Brokerage Firm May Be Launching an OTC Bitcoin Exchange

Brazil is home to half of South America’s population and wealth, and right now, the country’s largest investment broker firm may be primed to launch an over-the-counter (OTC) bitcoin exchange.

XP Investimentos has not made any official announcements on the matter, but according to reports in Portal do Bitcoin on Tuesday, April 17, 2018, the investment firm is behind a new company called XDEX with around $7.5 million in capital. Portal do Bitcoin did some research and connected the two the companies.

As the story goes, XP previously registered a new company called XP Coin Intermediacao. In November 2017, at the time cryptocurrency markets were on fire, XP Coin changed its name to XDEX and got a $1.5 million influx of cash. Later, in February 2018, it received another $6 million.

OTC Trading

While not much is known about the new cryptocurrency exchange, Portal do Bitcoin claims that a source unwilling to expose his or her identity said that XDEX was planning to do an OTC market, meaning it would focus on large fiat and Bitcoin transactions — in other words, heavyweight investors.

OTC simply means that the trade does not show up in the order books, like it does on exchanges such as GDAX or Kraken. Instead, in an OTC scenario, XP would act as a middleman connecting someone who wants to sell a large stash of bitcoin with a buyer who has a large sum of cash. The advantage of selling OTC is that traders can lock in their gains with one big trade; whereas if they were to sell through an exchange, the price could start slipping as the order was filled. For its part, XP would take a cut in brokering the deal.

In speaking with Bitcoin Magazine, Claudio Rabin, the reporter at Portal do Bitcoin who broke the story, said that an executive at one of the largest cryptocurrency exchanges in Brazil informed him that XP was already conducting OTC cryptocurrency trades.

XP the “Unbank”

For years, XP fancied itself as an alternative to traditional banking. In 2015, the investment firm went after new clients with an anti-banking ad campaign that included a commercial dubbed “desbancarize seus investimentos,” an expression that roughly translates to “unbank your investments.”

But that was before Brazil’s largest bank, Unibanco Holding, acquired a 49.9 percent stake in XP for $2 billion in May 2017. Since that time, XP has begun taking a keen interest in cryptocurrencies. In September 2017, the firm registered the “XP Bitcoin” brand at the National Institute of Industrial Property, an early hint that it was planning to open a future bitcoin brokerage. Soon after, in November 2017, XP hired Brazilian digital currency expert Fernando Ulrich as its chief economist of cryptocurrency, another strong signal the brokerage was inching into the space.

Brazil has been light on cryptocurrency regulation. In December 2017, Brazil’s central bank and securities regulator issued a joint warning to investors that virtual currencies had no official oversight in the country. In January 2018, Brazil’s securities regulator prohibited local investment funds from buying cryptocurrencies, saying cryptocurrencies cannot be considered financial assets. Now, with the country’s biggest financial players getting into the game, regulators may have reason to take a stronger stance.

In response to a request for comment from Bitcoin Magazine, a spokesperson for XP said in an email, “We have nothing to say about this matter.” Its website, Xdex.com.br, was unavailable at press time.