The crypto winter may have cast a chill on global interest in virtual assets, but in Latin America, the flame is burning brighter. Over 4 million individuals in Brazil are embracing the crypto space, enticing even decades-old financial companies to step into the segment.

Financial technology firms and banks alike are venturing into the crypto business, a highly sought-after market among Latin American users and a significant source for generating fee income among companies.

In a notable move, Itau, the largest private bank in Brazil and Latin America, has become the first among its peers to enter the realm of crypto trading services. While large neobanks like Nubank and Mercado Pago, owned by online marketplace Mercado Libre, have already ventured into brokerage services over a year ago, Itau’s entry signals a significant step for traditional banks embracing the crypto landscape.

“The most profitable product in crypto is the purchase and sale of assets, and the commissions they obtain from these operations both with individuals and institutional clients,” said Ignacio Carballo, head of Alternative Finance at Americas Market Intelligence.

Banks get into crypto in Brazil

The $70-billion dollar bank, whose stock trades in U.S. markets, announced it was breaking new ground by allowing its customers to start trading Bitcoin and Ether. These would be made available through its online investment tool, Ion.

“A major player in the traditional financial market expands its offerings to include digital assets,” said Bruno Diniz, a fintech consultant in Brazil and book author. “This is one of the clear signs that we are living in the era of the crypto economy – and that the convergence between the crypto reality and the traditional world continues to advance rapidly!”

With nearly 100 million customers in Brazil, the bank has faced challenges from nimble challenger banks that rapidly signed up millions of customers. Initiatives like venturing into crypto services showcase a 20th-century institution’s ongoing efforts to compete with neobanks, leveraging strategic rollouts to keep pace with the innovation of their more agile counterparts.

Nubank and Mercado Pago already in business

Indeed, major players like Nubank and Mercado Pago had already set foot in the crypto space in 2022, experiencing remarkable success. Their swift traction underscores the substantial demand in Brazil and Latin America for stablecoins and crypto. Within just one month of its June 2022 launch, Nubank announced it had already attracted one million customers to its crypto offerings.

In a more recent development, both fintech giants have expanded their crypto services by integrating USDC, a stablecoin pegged to the U.S. dollar, into their offerings in select countries. Given their lower volatility, stablecoins have gained significant traction in Latin America, where populations contend with weak currencies and pervasive inflation.

Certainly, other banks in the region have attempted to offer crypto services, but faced obstacles. For instance, in Argentina, the central bank barred traditional lenders from entering the crypto space, potentially eliminating a lucrative business avenue and a factor for customer engagement.

In Brazil, Itau has adopted a cautious approach, stating that it will gradually introduce this new feature for a select group of customers. The speed at which it can expand its services to the rest of its clients hinges on “regulatory certainty,” according to Guto Antunes, the head of Itaú Digital Assets.

Crypto reaches 4 million in Brazil

Presently, the Brazilian crypto market anticipates comprehensive regulations outlining how companies can engage with digital assets. A framework for Crypto Assets was approved at the end of 2022, later complemented with a decree designating the Central Bank as the overseer of the sector.

In July, the number of individual cryptocurrency investors in Brazil surpassed 4 million, as reported by the Brazilian Federal Tax Agency. This figure highlights the potential for banks and fintechs offering services in this segment. The report also indicated that nearly 20 billion Brazilian reais, equivalent to close to $4 billion, were transacted in that month.

In this case, Bitcoin was the leading crypto in terms of number of deals (840,000 in July), followed by Ether (275,000) and stablecoin USDT (232,000).

Certainly, not all endeavors in crypto have been success stories in Brazil. In the second half of this year, two digital lenders in the country—online broker XP and the PicPay digital wallet—decided to sunset their crypto services in Brazil.