fintech Binance and MasterCard recently partnered to issue a prepaid consumer card in Brazil, allowing them to make payments and transactions, using for this its assets in 13 cryptocurrencies, including Bitcoin, Etherum and Binance USD.
However, it is not a novelty: Argentina was the first Latin American country to put this tool into operation last August. Besides, there are the experiences of LemonCash, Buenbit and Belo. Also in the European Economic Area, an offer similar to the one we mentioned was launched. But what is relevant is that In Brazil, 49% of local consumers acknowledge having made at least one transaction with cryptocurrencies in the last 12 months, compared to 41% of the world average.
Thus, with consumers with a propensity to use cryptocurrencies greater than the world average, in a market the size of Brazil and the boost that a prepaid card such as Mastercard with wide penetration in the socioeconomic level of medium and low consumption, the use and therefore the acceptance of cryptocurrencies as a means of payment and store of value will experience a strong boost.
The origin. The credit card was born in 1950, in New York, invented by Frank McNamara and Ralph Schneider. There are precedents in the United States, when Western Union, in 1914, granted a line of credit without charging interest to selected clients, so that they carry out transactions in their offices and delivered them without costs, a cardboard card for identification and control of the credit granted, which was an individual line, free, for each chosen client. In these cases, the trust that the client deserved facilitated their access to consumer credit.
Purchase cards, in turn, are an evolution of credit cardswhich allow those who do not have paper money at the time they wish to carry out the transaction to buy (factual restriction), nor are they deserving of commercial or bank credit (financial restriction).
Purchase (or prepaid) cards, with great penetration in Uruguay (such as the successful cases of Midinero and Prex), are already installed in this market, just as they were consolidated in Argentina years ago. Orange card and recently MercadoPago.
As a reversal of history, in the case of Prex Uruguaythe purchase card itself, which operates with funds deposited by its holder and after analyzing the user’s consumption profile, at his request, can grant him a credit quota for consumption.
As an innovation for the Uruguayan market, Prex allows you to buy, sell, hoard and make transactions using nine cryptocurrencies. Therefore, the proposal that we discussed at the beginning of Brazil is not innovative; but its possible impact on the demand, hoarding and use as a means of payment in the region, of these crypto assets.
There is a manifest greater acceptance, in ordinary life, of various cryptocurrencies. So, Beyond the break in the euphoric trends that caused the collapse of FTX in 2022 and the sharp loss of assets experienced by Binance at the beginning of 2023, cryptocurrencies are experiencing a consolidation in their demand and use. Even the acceptance by the Treasury of the Province of Mendoza, as a means of payment for the cancellation of tax obligations, strengthens this trend.
In conclusion, it is foreseeable that in 2023, the use of cryptocurrencies will be promoted in the region, due to different factors, among which are the local exchange restrictions, the volatility of some currencies and the lack of accessible credit for consumption and for the investment.
Therefore, if the use of cryptocurrencies as a means of payment and as a store of value increases, the next step will be its use as a unit of account and the consequent business budgeting for this type of asset. This will not happen in the short term; but it is certainly the future to come. Pending in this instance is the formalization of markets that generate greater certainty and less price volatility for each of the cryptocurrencies.
Without actually being in favor of regulations, in this case, the total absence of rules means that there are no markets for the medium and long term, which generate confidence for genuine investment. For this reason, without advocating for extreme regulations that take away the initiative of private agents, the next step, for the consolidation of the use of cryptocurrencies, is to adapt the good existing regulations that strengthen the laws of the market, or to sanction a few others and good, to formalize a market that little by little ceases to be informal and merely speculative.
In this move towards the more widespread use of cryptocurrencies, the impact that the product offered by Binance and MasterCard will produce in Brazil will give a greater boost. Staying behind the facts is as harmful as dealing with binary principles: even those who love freedom and the free play of market forces in dynamic economies know that there should be few clear rules of the game so that economic agents, assuming risks, generate legitimate profits and that they are protected.
Progress, innovation and productive activity require a reliable economic ecosystem. If the trend towards greater use of cryptocurrencies is not accompanied by the creation or adaptation of clear rules of the game, there is a risk that, in the face of a run, a bankruptcy (for example, as was the fall of the FTX) or a crisis in the sector, typical of business risk and the different trends of any market, are associated with its negative effects, with defects or flaws in the tradable instrument, which naturally will generate questioning of the traded instruments themselves. An asset too valuable to neglect.
#Lawyer and business advisor.
by Marcelo Loprete
