Despite the sharp drop in value this year, mature fintechs in Latin America are doubling their bets on cryptocurrency and incorporating blockchain technology into their ecosystems.
Last month, Mercado Libre, the leading e-commerce marketplace in the region and a significant fintech player, launched Mercado Coin, its first-ever token that will be initially available in Brazil as part of its loyalty program. The digital asset, originally valued at $0.10 apiece, will be rewarded as cashback for users shopping online and open to market fluctuation.
The decision to create Mercado Coin is the latest in a series of decisive steps at Mercado Libre to embrace the nascent technology. The company had long been considering a way into the cryptocurrency space. It had invested in crypto companies Paxos and Brazilian unicorn Mercado Bitcoin, and as of late 2021, it began offering brokerage services in the country.
There was a sizeable interest: the company reported over one million customers just a few months after launching.
Demand high despite ‘crypto winter’
Despite the so-called crypto winter, demand for cryptocurrency in Latin America shows traits of resilience. Investors often turn to alternative assets with unstable local currencies to escape inflation and depreciation.
For prominent fintech players, incorporating crypto into their offerings represents a clear chance to strengthen the ecosystem and enhance customer retention.
“These giant companies, perceiving enormous demand from their users, began to look for ways to jump into the crypto asset revolution,” Ignacio Carballo, Crypto & Alternative Finance lead at Americas Market Intelligence, said. “They seek to offer an increasingly wider range of financial services so that users can find everything in one place.”
With Mercado Coin, the company’s 80 million users in Brazil will be able to make purchases in the marketplace, with the possibility of selling for fiat currency through Mercado Pago, the company’s massive fintech unit. The Ethereum-based token will reward users for purchasing certain products on site.
“Blockchain technology allows us to open doors to a new range of global solutions that are being developed and provide value to our users,” Guilherme Cohn, Corporate Development Senior Management at Mercado Libre, told Fintech Nexus. “We do not have a short-term view of crypto disruption. Our strategic objective is to generate long-term value for our users.”
Signed with Ripio
To power the token, Mercado Libre signed an agreement with Ripio. This crypto asset platform will be the custodian and exchange for purchasing and selling cryptos made through the Mercado Pago app.
After a sharp boom last year, cryptocurrencies across the board have seen massive repricing in the face of higher rates and more global risk aversion.
However, that is not deviating these companies’ plans into the sector.
“Context and timing do matter,” Cohn said, “but does not change our goal of generating greater engagement throughout our ecosystem.”
To be sure, Mercado Libre is not alone among financial technology companies hopping into crypto. Many are branching out into the sector, with an increasing number of firms adding exchange capabilities as a first step.
Nu Crypto launched
Nubank, the largest digital bank in Brazil, launched brokerage services earlier this year. Nu Crypto, as the company calls it, has also reported over one million clients as of the first half of this year.
For non-crypto fintech companies, innovation does not stop right there.
“We have been following the growth of blockchain technology closely since its inception, as we believe it is a tool that can streamline operations and connect people,” Mercado Libre’s Cohn said to Fintech Nexus.
In a tweet following the announcement, its founder and CEO, Marcos Galperin, said that Mercado Coin gave “further impetus to our loyalty program” and is “another step to democratize financial inclusion in Latin America.”