In December 2017, American billionaire Warren Buffett warned investors about the craze around cryptocurrencies in a widely-shared article published by The Wall Street Journal. In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending, he wrote. Two months later, Nubank – the fintech startup that was one of Buffett’s biggest investments at the time – has announced its plans to launch its own digital currency.
The latest foray into digital assets by a major financial institution will occur next year when the Brazilian startup for digital banking Nubank introduces its own coin.
On Wednesday, Nubank said that it will introduce the Nucoin cryptocurrency in the first half of 2023. The business describes Nucoin as “a new approach to honour client loyalty and stimulate participation with Nubank products” in a news statement. Holders of the token will receive discounts and other benefits, according to Nubank.
The initiative, according to Fernando Czapski, general manager for Nucoin at Nubank, “is another step ahead in our confidence in the revolutionary potential of blockchain technology and to democratise it even further, extending beyond the purchase, selling, and maintenance of cryptocurrencies through the Nu app.”
According to the company, Nubank said that it will invite 2,000 clients to participate in a discussion group for influencing the development of Nucoin while “adhering to established norms in blockchain initiatives.” In this stage, rather than focusing on feedback, the suggestion is to investigate a decentralised product creation process that is typical of Web 3.
The coin was created using the “Layer 2” Polygon network, which seeks to reduce congestion on the Ethereum blockchain, where transactions may sometimes be expensive and time-consuming to complete. According to Polygon, their platform can handle hundreds of transactions every second.
The creation of a bank-issued cryptocurrency is not unique to Nubank. JPMorgan launched JPMCoin, a so-called stablecoin that maintains a one-to-one peg to the dollar, as its own currency. Unlike that currency, the value of Nucoin changes dependent on supply and demand, much like the currencies bitcoin and ether.
It follows prior attempts by banks and payment companies into the bitcoin business. Mastercard launched Crypto Secure in October to help card issuers stop fraud involving cryptocurrency exchanges. Aside from PayPal and Robinhood, several businesses provide bitcoin trading. While all of this is going on, Goldman Sachs, a Wall Street bank, has its own internal cryptocurrency trading division.
The debut of the new currency occurs during a challenging time for cryptocurrencies. Since the start of 2022, several digital currencies, including bitcoin, the largest currency in the world, have lost more than half of their value, and the market is currently going through a severe downturn that speculators are dubbing “crypto winter.”
Governments in the United States, the European Union, and other nations have established regulatory frameworks for the industry. As a result, authorities are now more wary about digital currencies and the possible harms they may do to consumers.
When questioned if the company had gotten regulatory approval in Brazil prior to the release of its coin, a Nubank representative said that it “constantly examines the legal framework as a critical aspect of our product development process.”
With a purple no-fee credit card, Nubank made its debut in Sao Paulo, Brazil, in 2013. Brazil is well known for its expensive, outmoded banking system. Since the company’s founding nine years ago, it has gathered 70 million members in Brazil, Mexico, and Colombia.
Warren Buffett, a well-known investor, is among those who back Nubank, which went public in the latter half of last year. Buffett’s business, Berkshire Hathaway, invested $500 million in Nubank in June 2021. The company’s worth on the stock market is $20.4 billion, which is less than half of what it was when it was listed in December 2021.
Nubank has already joined the cryptocurrency market through its Nucripto platform, which enables trading in a number of tokens including bitcoin and ether. The exchange, which makes use of Paxos’ blockchain infrastructure technology, garnered 1 million users in just one month of operation.