Fin-tech, Digital Identity and E-Government in Brazil

Brazil initiated outreach around a digital government strategy in 2016 with a national strategy for internet of things deployment prepared by McKinsey was made public in 2019. As is the case with many nations pursuing e-government initiatives Covid lockdowns hastened implementation. In 2020 the United Nations E-Government Development Indexgave Brazil a very high rating, one of the top in the Americas lauding adoption of distance learning, track and trace technologies, tele-medicine, and remote work options.

Officials participated in the UN’s “Roadmap for Digital Cooperation” effort, following the Estonia model, which was devised by stakeholders in 2018-19. Fabrizio Hochschild of Chile chaired. Beyond the UN agencies and world governments, representatives of dozens of influential companies, universities, and NGOs took part. Among them were Future of Life Institute, Alibaba, Microsoft, Mastercard, Ethereum, Gates Foundation, World Economic Forum, ARM, Cisco, Facebook, m-Pesa, Mozilla, Google, Graduate Institute of Geneva, Mitre, Verizon, UPenn, New America, DeepMind, Oxford Internet Institute, Ford Foundation, ICANN, and Omidyar Network. The report’s focus areas included: global connectivity, digital public goods, digital inclusion and data, digital help desks, digital human rights, artificial intelligence, global commitment on trust and security, and digital cooperation architecture. Brazil was assigned to Artificial Intelligence. Currently 45 million residents of Brazil are considered “digitally excluded.” The goal? Get everyone “connected” by 2030; no one “left behind.”

The very early stages of digital identity in Brazil began two decades ago with the formation of ICP Brasil – Public Key Infrastructure whereby “digital signatures” are encrypted to authenticate transactions and make them legally valid. The intent was to advance transition to e-commerce and e-government. eIDs were first used for tax filing purposes and later for legal filings. In 2010 it was integrated into Civil Identity Registry with RFID chips as well as chipped passports. Digital identity research into public key infrastructure, including development of Ethereum smart contract university transcripts, is being carried out at the LabSec Computer Security Laboratory at the Federal University of Santa Catarina in Florianopolis.

A year before the pandemic was announced McKinsey Global Institute released a report, “Digital Identification: A Key To Inclusive Growth,” that outlined economic potential for seven countries in the digital ID space, including Brazil. It was prepared in consultation with staff from the Rockefeller Foundation, Open Society, and Omidyar Network. Its findings were that 13% of Brazi’ls GDP could be unlocked once digital ID was imposed. Crisis-precipitated financial inclusion programs boosted millions of unbanked people into the digital economy. The month after the pandemic was announced, CEF (Caixa Economica Federal, the government-owned bank) offered emergency funds to citizens who registered through the DataPrev social welfare screening database and set up a phone-based digital bank account. That spring the government agency Serpro also rolled out a unified digital identity system app with QR codes that combined social security numbers with driver’s licenses and tax form submission.

The shift to online education also created markets for digital proctoring software. Mastercard and AmigoEdu, an organization that manages entrance exams and scholarship applications, joined to promote Meu ID. KYC (Know Your Customer) biometric authentication company idwall provided infrastructure to link scans of driver’s licenses, facial recognition photos, and background checks onto one smart-phone app. Once a person has their authenticated app-based digital ID, the idea is they would be able to use that digital ID to hold non-education related credentials such as those for banking, travel, or age-limited purchases like alcohol.

Two years ago, Brazil’s Central Bank CIP (Camara Interbancaria De Pagamentos) began working with IBM and Hyperledger to create a standardized blockchain Device ID. The system links the Brazilian Payment System with accounts that are authenticated with phone and behavioral biometric data. Important to note in reference to the paragraph regarding education authentication leaching over into banking – Dallas Greenlight Credentials also uses IBM and Hyperledger for blockchain education transcripts and mental health data. Device ID has the backing of the national bankers’ association, and Bradesco, the country’s largest bank launched the service in the summer of 2019.

The Metaverse will run on blockchain, and it must be coded into reality. As I see it, those at the top intend to get low-income Black and Brown youth do much of that work – either through unwaged or low-wage labor. They will likely also coerce youth into self-financing the training to earn the right to do that work, creating new debt products like ISAs (income share agreements) and Career Impact Bonds to further enrich the puppet masters.

The World Bank is a research partner on “Program Your Future,” a training initiative  for “opportunity youth” run out of a community sports center, Vila Olimpica Clares Nunes. They will document the model to create a base of evidence demonstrating “positive social outcomes,” so the low-cost training program can be brought to scale. Similar types of programs cultivating this demographic are cropping up around the world, like a gamified phone-based employment app targeting vulnerable Arizona children as young as sixteen with digital nudges. The app scheduled for roll out in 2022 is being created by students at Arizona State University’s Smart City Innovation Center in collaboration with Amazon Web Services and client St. Joseph The Worker’s Mission in Phoenix.

I predict app-based gig employment will ultimately be melded with online “lifelong learning” modules, since ASU is deeply involved in blockchain credentials and is rapidly moving forward with the dream of Michael Crow, ASU president and founding board chair of In-Q-Tel, to create a billion-person university. The Koch Foundation has been pouring money into expanding the school’s “trusted learner” network with “customized” learner journeys and mastery transcripts, all of which I expect will circle back around to data-mining to feed machine learning systems as we pressure the coming generations to remake the natural world as a militarized, synthetic counterfeit. The Center for Games and Impact at the university, which maintains close institutional ties with US defense interests, has developed a micro-credential-based “lifelong learning platform” called Thrivecast.

The 120 participants in that World Bank program in Rio get weekly classes in basic programming along with financial literacy instruction. This latter part is important, because based on what I am seeing in blockchain media, there are organizations planning to set up social impact markets around finclusion, or financial inclusion (we’ve got you on blockchain). I suspect savings rates in digital accounts are going to end up being an impact metric for human capital investors. In a May 2020 blog post, MakerDAO signaled that is was wading into the social impact space, “Doing Well By Doing Good,” noting the importance of DAI savings rates and highlighting its participation in a FIFA-affiliated e-sports charity event. Viewers of the online competition, which aired on Twitch, were encouraged to donate DAI in support of Red Cross Covid-19 relief. In this one event we see the melding of soccer, gaming, digital media, crypto currency, social impact, public health, and the reach of NGOs with the youth of the Global South smack in the center.

If students pass a proficiency exam at the end of the main course, they qualify for a higher-level option to begin to learn blockchain technology. Partners include the Brazilian Securities and Exchange Commission; Banco Mare, a fin-tech banking alternative advancing social impact investing in the favelas; the Federal University of Rio de Janeiro; Centro de Intergracao Empresa-Escola, apprenticeship broker; and SICOOB, an organization of credit cooperatives. Support for the blockchain portion of the program comes from MakerDAO.

In 2019 MakerDAO company provided development financing to Opolis to create infrastructure through which employers will be able to manage salary and benefits for a global gig workforce via DAI, their US Dollar soft-pegged stable coin. For the next phase of globalization to work, the ruling class needs frictionless cross-border transactions. Most smart contracts operate through Ethereum, which MakerDAO deployed to build out DeFi, decentralized finance. DAI has gained considerable traction in Latin America over the past five years, ramping up even more under lockdowns. MakerDAO is away Pundi X point of sale terminals to merchants in Brazil, El Salvador, Argentina, and Colombia to normalize acceptance cryptocurrency payments with balances converted to their DAI stable coin. At the end of 2021, MakerDAO and Community Games, a blockchain e-sports platform, hosted nine “play to earn” tournaments with prizes of crypto awarded to winners. The effort was designed to reaffirm to Latin American gamers that e-sports and blockchain are interrelated and to train players in the use of digital currencies.

With MakerDAO, people can use crypto assets as collateral for loans. Traditional asset classes, including stock and real estate portfolios are being tokenized on blockchain, unleashing wave upon wave of ever more outrageous finance schemes. Centrifuge, a provider of novel supply chain finance products, began to collaborate with MakerDAO to tokenize real-world assets with the idea that it could one day become “a global credit system for the world.” MakerDAO’s Danish co-founder Rune Christensen laid out his vision to use DAI to advance climate-change initiatives where for each funded project that is part of their Sagittarius engine and hits a sustainability success metric will be saved as an NFT creating a “status signal” for socially conscious projects. That signal would be fed into gamified leaderboards connected to custom digital art.

For the past five years ITS Rio, the Institute of Technology and Society, has promoted adoption of blockchain technology, including Bitcoin and Ethereum, through its sponsorship of hubs hosting courses, meet-up groups, and conferences. A 2016 promo piece for Omidyar Network, by ITS director Ronoldo Lemos, set the course laying out many use cases from blockchain voting, supply chain tracking, sustainability certifications, GovTech, and as platform for Internet of Things sensors. One of his ideas, a land registry pilot with Ubitquity, a Delaware company, launched in 2017. The following year this small-scale pilot was included in a presentation to the World Bank Conference on Land and Poverty by J. Michael Graglia and Christopher Mellon of New America’s program on the Future of Property Rights. In 2019 Omidyar Network sponsored a project with ITS to evaluate the “appropriate uses and limits of digital identity.”

Mercado Bitcoin, based in Sao Paulo, is the largest crypto exchange in Latin America. It launched in 2013 and is managed by the Unicorn 2TM Group. 2TM received an infusion of $200 million from Softbank’s Latin American Fund in July then created a venture division in December to build out crypto-currency infrastructure across the continent. According to a write up in IBS Intelligence, areas for investment include DeFi, Decentralized Social, Digital Assets, NFTs, and Metaverse Infrastructure, all of which have relevance to residents of the favelas where the crypto empire is taking hold. Their first round included SL Tools, a disruptive blockchain finance marketplace serving hedge funds and asset managers. The IBS piece states that SL Tools is “a believer in the tokenization of everything.” Given what we know of hedge-fund scruples; I’m left wondering who exactly thought that was a good idea.