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This week, one of Brazil's most prominent soccer teams, São Paulo, announced the purchase of Giuliano Galoppo from Argentine mid-table club Banfield.
There is nothing exceptional there. Players frequently change teams. It was a remarkable occasion since funds were exchanged in the stablecoin USD Coin (USDC) via the Latin American exchange Bitso.
The CEO of Bitso in Brazil, Thales Arajo de Freitas, described the acquisition as "historic for Bitso, São Paulo, and South American soccer in general."
Not by chance did São Paulo explore cryptocurrency for a transaction. Bitso, the first crypto unicorn in Latin America, became a sponsor of the club, one of the largest in Brazil and owner of the renowned Morumbi stadium, in January.
In Argentina, the news was regarded as an attempt by Banfield to circumvent the country’s current foreign exchange regulations, which require exporters to convert U.S. dollars into Argentine pesos within five days after a transaction.
Banfield’s use of USDC to circumvent the Central Bank of Argentina (BCRA) would make sense, given the bank’s regulations do not reference “crypto.” In fact, if the BCRA compelled the club to liquidate its exports on the official exchange market, it would earn 131 Argentine pesos (ARS) per U.S. dollar, but the U.S. dollar reaches 300 ARS in the financial and illegal markets.
Dante Disparte, chief strategy officer of Circle, one of the businesses behind USDC, stated that USDC was used “to reduce currency risk.”
The usage of USDC by São Paulo, or Bitso, is not coincidental. The exchange teamed with Circle to offer an international transfer product in November, and the partnership has been profitable thus far. Bitso expects to handle an additional $1 billion in crypto remittances between Mexico and the U.S. by December 2022, a 400% increase over the same time in 2021.
São Paulo and Banfield’s transaction may have been less expensive than a SWIFT (Society for Worldwide Interbank Financial Telecommunications) transaction. BCRA sources informed CoinDesk that the Argentinian club would be compelled to convert the total value of the transaction into Argentine pesos at the official exchange rate, contrary to what Disparte stated.
The Argentine publication La Nación estimated the trade to be worth $8 million, despite neither club disclosing its terms. That is a substantial amount for a team the size of Banfield.
Banfield faces additional challenges due to crypto. A BCRA ruling announced last week prohibits the club from accessing the official exchange market to purchase players — an import, after all – at the official exchange rate for 90 days.
If the BCRA keeps its promise, Banfield will earn 1 billion ARS following the deal. Nonetheless, if it wanted to purchase the same player for the same price, it would have to get ARS 2.4 billion from local financial markets – where the U.S. dollar quote is 130 percent higher – as the BCRA’s reserves are exhausted and expected to be more than $4 billion negative.
The usage of USDC expedited the move and was clever marketing, but it did not resolve Banfield’s core problem. It made matters worse.
