Inside the booming cryptocurrency testing arena in Latin America

Inside the booming cryptocurrency testing arena in Latin America

Hermes Ribeiro Martins, a 34-year-old Web3 entrepreneur who lives in the Brazilian coastal city of Joao Pessoa, first heard about cryptocurrency via Twitter. It was 2016, a year before Bitcoin reached $20,000 and exploded into the mainstream. Ribeiro has started investing in the biggest cryptocurrencies. After Bitcoin crashed in 2018, he started moving into altcoins.

“I’ve finally found my tribe,” he said. luck.

Ribeiro immersed himself in technology, creating a crypto-focused Discord server and founding an NFT-based music company. He was not alone in Brazil. The country has one of the world’s fastest growing crypto communities, ranking seventh in Chainalysis’s 2022 Global Crypto Adoption Index.

People like Ribeiro who learned about cryptography from social media may be early adopters, but newcomers to the space are financial giants. In mid-August, Ribeiro saw an announcement from one of the largest companies in Latin America – e-commerce company MercadoLivre – to launch its own cryptocurrency, known as Mercado Coin.

Ribeiro saw this move as a no-brainer. Although based in Argentina, MercadoLivre’s largest market is Brazil. “It is an exceptional business, if applied in a safe manner,” he said of Mercado Coin. In the same month, Mastercard and NASDAQ announced their crypto-related initiatives for the region.

While critics often describe cryptocurrencies as a solution in search of a problem, boosters point to Latin America as a fertile testing ground — a region teeming with volatile currencies, incoming transfers, and complex payment restrictions. As established financial firms move to the region, Latin America may provide an answer as to whether cryptocurrency can achieve mainstream appeal.

MercadoLivre – or MercadoLibre, as it’s called outside of Brazil – was founded by Argentine businessmen in 1999 as a competitor to eBay. It has evolved over the years to become the most powerful technology company in Latin America as it borrowed from Amazon’s playbook and built massive fulfillment networks. During the pandemic, with e-commerce sales soaring, MercadoLibre receipt The highest market value of any company in the region.

MercadoLibre has continued its rise through diversification. Just as Amazon began prioritizing cloud services through AWS, MercadoLibre realized it could expand its core business through fintech, building its online payment tool, Mercado Pago. In the second quarter of 2022, Mercado Pago represented 45% of the company’s $2.6 billion in revenue, with experts anticipation It will soon overtake e-commerce.

“MercadoLibre is definitely pushing more in financial services to maintain market share in the region, and further enhance market penetration,” said Grace Broadbent, an Insider Intelligence research analyst focused on payments.

Latin America still has a large unbanked population and is underbanked, with most estimates hovering around 50%. MercadoLibre has relied on its broad customer base to facilitate users with its financial offering. It has succeeded by adapting to customer needs, such as allowing cash payments through Mercado Pago.

The results were amazing. As a Latinometrics data analytics company describe itIf Mercado Libre users were a country, they would be the third largest in Latin America.

In December, MercadoLibre began experimenting with introducing cryptocurrency into its payment platform in Brazil, the largest market in Latin America. I started using Paxos for the blockchain infrastructure Allow Users buy and sell Bitcoin, Ether, and the stablecoin Pax dollar on Mercado Pago, with a minimum transaction size of one Brazilian Real, or about 20 cents. Within two months, service receipt million users.

“It’s a good data point to see that there is interest in the area,” Broadbent said.

The recent launch of Mercado Coin came on the heels of the trading feature, which further increased the company’s commitment to cryptocurrencies. Cryptocurrency will be ERC-20 token Building on the Ethereum blockchain in partnership with Latin American-focused crypto firm Ripio.

Unlike the previous cryptocurrency trading feature, Mercado Coin will be integrated into the company’s broader e-commerce platform. Currently, Mercado Coin can only be traded through Mercado Pago for around 10 cents. Users can make purchases on MercadoLivre with the token, and earn cash.

“By combining an e-commerce platform, a digital wallet, and a digital currency, it gives MercadoLibre increased characteristics.” superappBroadbent said. “The crypto component fits with financial inclusivity and tries to meet consumers wherever they are.”

She added that crypto integration into the growing payment platform MercadoLibre makes sense given global trends. Despite Crypto Winter, Insider Intelligence predicts that the value of crypto-payment transactions worldwide will reach $16.16 billion in 2023 – a more than sevenfold increase over three years. According to Morning Consult, Latin America last year recorded the highest penetration of cryptocurrency holders globally at 30%.

Ricardo Seppi – Getty Images

Joao Felipe Marques Falcao, 24, a crypto enthusiast who lives in a Brazilian city near the border with Paraguay, said he has been following the launch of Mercado Coin, as there is nothing like it in the market yet.

“It’s nice to be able to buy a product and get a cash back, and use that to buy more stuff, or even convert it into other currencies,” he said. “It’s like a new way to use money.” As a frequent MercadoLivre customer, he said he was eager to give it a try.

The feature was launched in late August for MercadoLivre’s 80 million customers in Brazil. Although the company declined to provide participation numbers, it said it hopes to soon expand the offer across Latin America.

“It’s like a new way to use money.”

Joao Felipe Marques Falcao

MercadoLibre may be the most important domestic tech company in Latin America to move into crypto, but it’s not alone from a global context. In the same month that e-commerce giant Mercado Coin was introduced in Brazil, Mastercard announced that it had partnered with Binance – the world’s largest crypto exchange – to launch a prepaid card in Argentina that would allow Binance customers to make purchases and pay bills using cryptocurrencies. . a exploratory study By Mastercard from July found that 51% of consumers in Latin America have made at least one transaction with cryptocurrency.

Because of her constant battle with extremism inflationArgentina is often described as the perfect testing ground for cryptocurrencies. Several major crypto companies in the region, from the metaverse decentralization To the payments platform Ripio, which started in Argentina, although the challenge has long been to qualify ordinary people. However, the country ranked 13 This year on Chainalysis’ global adoption index.

“Argentina offers a great test case for entry into the region due to the rate of consumer adoption, but also because of the geopolitical and macroeconomic conditions that we are seeing in the market,” said Kiki Del Valle, Executive Vice President of Market Development at Mastercard. for Latin America and the Caribbean. “A massive influx of global players and Latin American players is entering the LAC region.”

16.16 billion dollars

Expected Value of Crypto Payment Transaction Worldwide in 2023
Source: Insider Intelligence

Another newcomer is NASDAQ, which partnered with Brazilian crypto exchange Digitra in late August to help facilitate liquidity on the platform. While this is certainly a more technical application than Mastercard or MercadoLibre, Digitra founder Rodrigo Batista said it will help achieve the long-term goal of qualifying ordinary people.

“The main reason that adoption hasn’t spread yet is user experience,” he said. luck. He said that people will start using cryptocurrencies when they don’t even realize they’re using them, like how consumers don’t understand the underlying technology behind streaming services.

From President Nep Bukele’s adoption of Bitcoin as legal tender in El Salvador reliant on remittances to Binance prepaid cards in inflation-ravaged Argentina, Latin America presents a unique laboratory where the main use case for cryptocurrency is not speculation.

Even as companies ramble around buzzwords like “financial inclusion” and “democratization,” it will be difficult to assess whether they have succeeded in stimulating engagement until they start providing user data. Regardless, the entry of major players such as MercadoLibre and Mastercard shows that a new era of financing for Latin America has begun.

“The competition is only good,” said Del Valle. luck. “It pushes to embrace the most accelerating pace of all to understand and demystify some of the concerns they may have in space.”

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