Regulating Virtual Asset Service Providers: The OTC Representative Model

Introduction

Presentation on how Mercado Bitcoin (MB) structures the VASP (Virtual Asset Service Provider) model under Brazilian regulation, enabling existing OTC (Over-The-Counter) desks to operate as MB representatives while maintaining client relationships. Fabrício Tota shares 8 years of OTC desk building experience and connection between traditional crypto ecosystem and regulated infrastructure.

Key Learning Points

• Critical regulatory timeline: 224 days until October 30, 2026 (7 months 10 days, 32 weeks) to apply for virtual asset service provider license. Central Bank resolutions 519, 520, 21 already establish framework. World Cup reduces effective timeline to ~25 weeks.
• The big ticket paradox: In OTC desks, when clients dramatically increase volume, suspicion and KYC scrutiny increase proportionally. True OTC players progressed from simply "filling forms" to real depth in customer understanding: what do you need?, how will you operate?, speed or liquidity?, API or WhatsApp?
• Shift from Bitcoin to stablecoins: Brazil's Federal Tax Authority data shows volume substitution: Bitcoin dominated through ~2021 for payments, stablecoins now preferred payment solution. 80% of stablecoin volume occurs outside regulated exchanges, in OTC/payment infrastructures.
• OTC desks as infrastructure: Transformation from "three guys and a Ledger" to robust payment and stablecoin infrastructure businesses with deep relationships, true KYC, customized interfaces, tailored execution, fast settlement in fiat and crypto.
• Comparison: Traditional OTC vs Regulated VASP: Traditional OTC: reduced capital, lean structure, dual commercial-operational team, variable costs, relationship-driven growth, proportional governance. Regulated VASP: elevated minimum capital, formal governance structure, committees, regulatory reporting, personal regulator responsibility, elevated audit, dedicated compliance, permanent fixed costs.
• Inspiration in autonomous investment agents: Successful model in securities market: 28,100+ registered advisors at CVM, 1,000+ offices. Average B3 client: R$6,000; advised client: R$313,000. Relationship: intermediary dominates origination and client; house provides infrastructure and regulation. Same model applied to OTC/VASP.

Tokenized Asset Infrastructure and Distribution

Mercado Bitcoin has issued and distributed R$2 billion in tokenized assets over past years, R$1 billion in last year alone. Distribution through 100+ autonomous advisor offices, 3,000+ individual advisors, 30+ dedicated B2B distribution staff. Partnerships also with platforms like Magalu Pay so consumers buy Bitcoin/Ether through MB as regulated infrastructure.

Regulatory Stack and Licenses

Mercado Bitcoin accumulated multiple licenses: Payment Institution (IP) and Securitization Entity with Central Bank; CCTVM (Currency Exchange, Securities and Exchange Broker) with CVM; Asset Manager and Participatory Investment Platform (CVM 88); Regulated by Bank of Portugal as Exchange and Custody Agent. This stack enables operation in Brazil and Portugal with complete regulatory coverage.

VASP Service Model: OTC as MB Representative

Structure where OTC maintains client, relationship and origination; performs true KYC; closes operations; manages client experience. MB provides: VASP licenses, governance, operational responsibility, institutional compliance/KYC, anti-money laundering prevention, IT infrastructure, APIs for trading, RFQ (Request for Quote), Smart Order Routing for best prices. Client remains OTC property; relationship is OTC's; infrastructure and regulation from MB.

Iago: AI Agent for Customers

AI assistant named Iago (wordplay on IA/AI) that converses with clients enabling operations and conversational queries. Especially important in B2B to support advisors and route to humans when needed. MB developed multiple AI initiatives beyond Iago, including internal AI-supported processes, mainly available in Bitbi retail.

Strategic Synthesis and Regulatory Responses

Central Bank maintains daily monitoring with new communications and adaptations. No significant changes expected, but dynamic environment requires continuous system adaptation, file layouts, processes. Examples: clarifications on reporting frequency, file structure, submission destinations. Industry challenge is choosing between: (1) building VASP from scratch (time, energy, skill-intensive, risky without license), or (2) continue operating safely focused on clients via MB model. MB already built complete infrastructure ready to support OTCs as representatives. Compliance is not a business: MB has anti-money laundering prevention committee with weekly frequency, giant compliance/regulatory team working daily on adaptations.

Frequently Asked Questions

• What is the final deadline for VASP license application? October 30, 2026 (224 days from now). Institutions have ~7 months to prepare documentation and compliance.
• What's better: building VASP from scratch or using representative model? Representative model allows OTCs to maintain clients while MB provides infrastructure, license, and compliance—reducing risk and costs.
• What's the advantage of autonomous agent model? Proven successful in securities market: intermediaries dominate client/origination, brokerage provides infrastructure. Same principle in crypto/VASP.