Nubank Becomes the Latest Latin American Company to Launch a Cryptocurrency

The Warren Buffett-backed Brazilian fintech follows MercadoLibre in announcing its own token: Nucoin

Courtesy/Nubank
October 22, 2022 | 12:52 PM

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Bloomberg Línea — Warren Buffett-backed Brazilian fintech Nubank (NU) on Wednesday announced the launch of Nucoin, its own digital currency on the Polygon blockchain network.

Scheduled for launch in the first half of 2023, the company’s tokens will be distributed at no cost to customers and will serve as the basis for the creation of a Nubank benefits program in Brazil.

Ths is the second launch of a cryptocurrency by a Latin American company in as many months, as in August, e-commerce giant MercadoLibre (MELI) launched Mercado Coin, a cryptocurrency as a loyalty benefit within the Ethereum blockchain, and the infrastructure provider for which is Argentine company Ripio.

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Nubank, meanwhile, has opted to partner with US-based Polygon Technology for the development of Nucoin, and which serves companies such as Stripe and Adobe.. The blockchain company also operates on the Ethereum network.

Sandeep Nailwal, the co-founder of Polygon, said that having one of the world’s largest financial institutions distribute its own cryptocurrency “is a strong validation of the utility that blockchain and crypto have to offer”.

In a press release, Fernando Czapski, the head of Nucoin, said that the proprietary cryptocurrency is a new way to acknowledge customer loyalty and encourage engagement with Nubank’s products.

Since May, Nubank had already made Bitcoin and Ethereum buying, selling, and holding available on its app through a partnership with Paxos.

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The goal of Nubank, which has received investment from Warren Buffett, who is a vocal critic of cryptocurrencies, in developing its own crypto is to offer customers benefits such as discounts and perks as they accumulate Nucoins.

The fintech has 70 million customers in Brazil, Mexico, and Colombia, and will invite around 2,000 customers to join the Nucoin testing process throughout October and November.

The most-engaged customers will be able to join the “NuCommunity”, an online space for dialogue with customers to use the fintech’s products and services.

According to Nubank, such customers will discuss the use of cryptocurrency in this area and, in addition to providing feedback, help create the product in 2023.

Nubank decided to develop its own token to bring discounts and benefits as customers accumulate cryptocurrencies.

In an interview with Bloomberg Línea, Henrique Teixeira, Ripio’s global head of business development, said he sees Nubank and other companies making this move as a very positive step.

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“MercadoLibre was one of the pioneers and created a trend, and several other companies are following the same path. I believe it is a one-way road and from now on we will see other companies both in the financial segment as well as payment companies and marketplaces analyzing this possibility and going this way [of having their own cryptocurrency],” he said.

Tokenization is using blockchain technology which is highly resistant to fraud for a certain purpose. MercadoLibre and Nubank have made tokens, i.e. their own currency, as a loyalty program for rewards and for customers to procure better rates, for example.

This form of cryptocurrency use has been a major business for Ripio, where B2B partnerships have offset a slowdown in the number of individual users.

Ripio had hoped to end the year with 5 million users, but so far has around 3.5 million clients in Argentina, Brazil, Uruguay, Mexico, and Colombia.

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If individuals’ interest in cryptocurrency assets has waned with the so-called ‘crypto winter’ as a result of the macroeconomic scenario of high-interest rates, institutions are rowing the other way.

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Ripio said it is in talks with major institutions to provide services.

This week, Mastercard announced a tool that will enable cryptocurrency trading by banks using the Paxos infrastructure and which also manages the cryptocurrencies offered by MercadoLibre, in addition to Ripio, which works with Mercado Coin.

“Mastercard will be able to facilitate the entry of new banks that already work with them, and would like to start offering crypto to their customers, we understand that this solution will help develop the market,” Teixeira said.

-- Updated Ripio’s number of clientes