picpay office

LatAm fintech giants take aim at crypto-economy despite bear market

Large online banks and digital payment companies in Latin America are branching out into the crypto economy, with an increasing number of fintech firms in the region incorporating crypto exchange capabilities as the first step into digital assets.

Despite the sharp drop in value seen in the past weeks, financial technology players that have drawn millions to their wallets are now doubling down their bets on crypto. They have increasingly incorporated these services into their offering to respond to growing demand from users.

Last week, Brazilian mobile wallet provider PicPay said it offered trading services to its 30-million client base. It was the latest in a series of announcements from relevantly-sized fintech laying eyes on the crypto sector as a means to expand their product suite.

“The gap between the world of crypto and the financial market is shrinking,” Bruno Diniz, a fintech adviser in Brazil, said. “Despite the crypto winter, we still see great progress in this direction both from fintechs and incumbents.”

Bruno Diniz
Bruno Diniz

As the industry evolves, trading access is expected to be a stepping stone in a longer journey.

Going forward, PicPay said it created a whole new area to develop potential new businesses associated with the crypto economy. The company is reportedly working on creating its own stablecoin, which would be pegged to the Brazilian real and listed in major crypto exchanges.

“Picpay will enter this world very decidedly,” Anderson Chamon, co-founder and vice president of products and technology at PicPay, told Brazilian publication NeoFeed. “It will not be an accessory product (but) a significant line of business.”

One of many announcements in the space

The decision from PicPay, partially owned by Brazil’s Banco Original, follows announcements from other significant fintechs setting foot in the market.

Earlier this year, Warren Buffett-backed Nubank, the largest digital bank in Latin America by the number of clients, launched Nucripto, a feature within the app that allows its users to buy and sell both bitcoin and ether on its platform.

Nubank also said back then in May that it intended to allocate around 1% of its available cash to bitcoin to reinforce its commitment to the sector. The bank holds over 50 million customers in the region, most of which are Brazil-based.

“These fintech giants seek to offer an increasingly wide range of financial services so that users can find everything in one place,” said Ignacio Carballo, a Crypto & Alternative Finance lead at Americas Market Intelligence. “They want to get into this crypto world as another value-added proposition in their ecosystem.”

It is demand from its users that has led companies to take action. Official estimates from the Brazilian IRS suggested that locals traded approximately 200 billion reais in digital tokens and currencies, or close to $40 billion, only in 2021. In a recent survey by Gemini, 44% of Brazilians claimed they already owned some cryptocurrency.

Moving beyond Brazil

Undoubtedly, the acceptance of digital assets in Latin America is not restricted to Brazil alone. The region has seen significant adoption in the past few years leading to the crypto winter, with Venezuela and Argentina among the countries embracing it the most –according to a ranking by consultancy firm Chainalysis–in major part due to unstable economies and local currencies.

Last December, Mercado Libre, the Argentine e-commerce and fintech giant with a footprint in the entire region, broke new ground as one of the first non-crypto financial technology firms to offer exchange services in Brazil.

The adoption was massive: in the first quarter of 2022, the Amazon of Latin America reported over a million customers had done some transaction with crypto, of which 80% were first-time adopters. The company has not yet registered second-quarter results.

“Our fintech services are expanding well beyond payments, and we are increasingly able to offer a greater breadth of solutions,” the company said back then. “We are excited about the role we are playing to create a friendly user interface for crypto in Latin America.”

The company announced an equity investment in Mercado Bitcoin holding company, a Brazilian unicorn crypto exchange, and an undisclosed strategic investment in Paxos, a U.S.-based blockchain infrastructure provider.

Admittedly, financial companies branching out into crypto is not a trend unique to Latin America. Both traditional banks worldwide and well-known fintechs such as Revolut and PayPal have gradually incorporated these services.

“Far from stopping, this trend will continue to deepen,” Carballo said. He argues that the so-called crypto winter, which has led to crypto companies pulling the brake on growth and facing layoffs and restructuring, will allow other broader fintech companies to develop their expansions in the crypto world.

“The current context, in which everything related to crypto seems to have calmed down, will give traditional fintech players more time to decide what their strategy for crypto will be,” he said.

  • David Feliba is a Latin American business journalist with expertise in capital markets, banking, and financial technology. His work includes interviews with top executives and policymakers in the region and coverage of banking and fintech trends. He has reported from multiple countries across the Americas and has covered conferences both locally and abroad. Over the past years, his features have been frequently published in leading local and international news outlets. Some of it can be read at his personal site. He lives in Buenos Aires.

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