Brazil’s BTG Pactual Is Latest Bank to Embrace Crypto Assets

(Bloomberg) -- Banco BTG Pactual SA, Latin America’s biggest standalone investment bank, is joining the world of crypto assets with its own security token.

BTG plans to raise as much as $15 million through an initial offering for a token called ReitBZ that will be backed by distressed real estate assets in Brazil, Gustavo Roxo, the bank’s chief technology officer, said in an interview. The token will based on blockchain technology, the decentralized public ledger of transactions.

Investors will be able to buy the token through a digital platform by using Gemini Dollar, a so-called stablecoin issued by a firm founded by Cameron and Tyler Winklevoss and pegged to the U.S. dollar, or Ether, one of the most valuable cryptocurrencies. They’ll receive periodical dividends from the recovery of the distressed assets, which will be handled by a BTG-owned company called Enforce, the bank said. The token will be available worldwide, except for Brazilian and U.S. investors at first.

Yearly returns are expected to be between 15 percent to 20 percent in Brazilian currency terms, according to the bank, as the investment won’t be hedged. BTG will provide market-making services for the token so it can give investors the liquidity to sell if necessary.

“BTG is deploying its own capital to provide liquidity because it really believes in the crypto business,” Roxo said. “We came up with this structure because we think investors in the digital world have a higher risk-taking appetite.”

The crypto asset will enable the bank to cater its distressed real estate business to global investors in a cheaper way than traditional means, according to Roxo. ReitBZ will be perpetual and the initial offering period will last for around 90 days. Proceeds will be reinvested in the distressed portfolio.

Last week, JPMorgan Chase & Co. said it developed a prototype digital coin that it plans to use to speed up payments between corporate customers, becoming the first of the major U.S. banks to publicly introduce its own coin. Japanese lenders including Mitsubishi UFJ Financial Group started working on initiatives such as the MUFG Coin as early as 2016. Meanwhile, cryptocurrencies have been stumbling, with Bitcoin down about 80 percent from its highs in December 2017.

“We knew we needed to dominate this technology, so we started experimenting with it a few years back,” said Andre Portilho, BTG’s partner responsible for the initiative. “We thought Bitcoin and other currencies were turning too volatile, but we saw an opportunity with this token to try something new -- but also with our skin in the game.”

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