RIO DE JANEIRO, BRAZIL – Argentina’s Mercado Libre, the company with the highest market valuation in Latin America, is working on the development of its own cryptocurrency. The launch is planned for mid-year. One of its head offices will be São Paulo, Brazil, with a team of Argentines specially dedicated to this new development.
Last week, the company announced the purchase of shares of two companies linked to cryptocurrency trading in Brazil. The acquisitions are a further step to develop its own currency on these platforms, according to sources working for the company, who are not authorized to discuss the matter.
Brazil will be one of its headquarters, but Chile will also see Mercado Libre’s new creation. Initially, 5 countries are under consideration: the two mentioned above as well as Mexico, Uruguay and Paraguay.
In this first stage, Argentina would not be in Mercado Libre’s scope for the cryptocurrency. Given the brand’s bulk, the company does not want to get caught up in any discussion about the exchange rate. “If any exchange rate other than the official one is taken for the conversion into dollars (of cryptos) it will generate controversy and that is not desired,” a source with knowledge of the matter said.
Over the past week a screenshot was widely shared on Twitter where someone had searched for the word “Melicoin” and seemed to have found some hits from developers who might be working on it.
On the choice of markets, the team working in Brazil says it understands that it is “the largest capital market in the region.” The Mercado Libre brand was on the jersey of one of the most popular soccer teams in Brazil (Flamengo, which in 2019 won the final of the Libertadores Cup against River Plate). Sports sponsors usually seek high visibility with that marketing decision.
“Chile is another very attractive market, with good purchasing power and investment culture, people are familiar with equity investment. Mexico is unavoidable and is a special source of pride, since Mercado Libre competes there with Amazon and is doing very well,” the source said.
Uruguay is Marcos Galperín’s country of residence, the founder and major shareholder of Mercado Libre. “Paraguay is a small market, but its capital market dynamics are attractive, so it is highly likely that we will go there,” the sources added.
Colombia, another important market for Mercado Libre, is still under evaluation, with no final decision yet. The company is targeting all of Latin America, but implementation by country would respond to an orderly growth strategy, in compliance with the regulatory frameworks of the individual countries.
Although Mercado Libre’s stock has dropped 35% since November, the company’s market valuation exceeds US$50 billion. A recent decision by the Central Bank on the provision of funds in digital wallets could affect Mercado Pago’s profits, according to investment bank reports on the stock. The company has faced such fluctuations in the past.
During the third quarter of 2021, the last reported, Mercado Libre posted net sales worth US$1.857 billion. Two thirds are from the e-commerce website, while a third corresponds to fintech operations, such as Mercado Pago. The company’s profit reached US$160 million, approximately 8% of its sales.
Mercado Libre bought shares in 2TM Group, the company controlling MercadoBitcoin.com.br among others of a blockchain portfolio and Paxos, a regulated blockchain platform that allows cryptocurrency transactions in Mercado Pago in Brazil. Mercado Pago offers Bitcoin and Ethereum, among others, in the country. The company reported the transactions last week.
Cryptocurrencies have also been facing a recent plunge in quotations, which is believed to be linked to the increase in interest rates by the U.S. Federal Reserve. This decision could prompt capital to flow there (it is considered a “safe” investment) to the detriment of other more volatile investments, such as cryptocurrencies or shares of technology companies.