What to Know About MercadoLibre's Move Into Crypto

One of the most exciting emerging-markets companies out there is MercadoLibre (NASDAQ: MELI). On this Jan. 12 edition of "The Crypto Show" on Backstage Pass, contributors Chris MacDonald and Jon Quast discuss how MercadoLibre is looking for solutions to currency volatility in its core markets, and how cryptocurrencies can play into this.

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Jon Quast: We're talking about MercadoLibre. This news is a couple of weeks old now, a few weeks old. It's that MercadoLibre, often referred to as the Amazon of Latin America, but it could also be called the PayPal of South America or even the Shopify of South America. It's a broad business trying to enable really the digital commerce economy in a market on a continent that is still in the very early stages of adoption.

As you look at the things that MercadoLibre has had to do over the years: They start off as just a marketplace and then, "O.K., we're going to need shipping logistics also." So they start tackling that. And "Well, people also are going to need a way to digitally pay for things." So they develop their own solution to that, Mercado Pago.

Now, saying, "Hey we needed a stablecoin support," and they are basically going with the stablecoin called Paxos (CRYPTO: PAX) here. I don't know if I'm saying that right. But this is a fairly recent development.

Chris MacDonald: Yes, it is. That's a very good intro into what MercadoLibre does and what kind of company they are. A lot of I think investors view MercadoLibre as a growth company in emerging markets in the e-commerce space with the potential to really take over the market in terms of being the first mover in a big way. A lot of similar businesses to Amazon, but like you said, there's some financial services there.

It seems to me that they're looking to be the big player in providing not only the logistics and actual e-commerce side of the business, but ways for consumers to pay. We touched on Turkey for a bit in terms of inflation. But in places like Argentina and some of the Latin American markets, the inflation concerns are a big deal. How consumers choose to pay for these goods, perhaps a stablecoin is much more of a necessity in these markets to ensure you're not paying $50 for an item that you just paid $20 for last week because of inflation.

For MercadoLibre, it seems like more of a strategic move. The fact that they're partnering with an existing, or they're using an existing stablecoin, probably makes more sense for their business model. PayPal may have more strategic reasons to do, to try to create their own. But this is definitely just another news item that's come out recently that supports that idea that stablecoins could help really transform the crypto sector into a space where people use it for purchases.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris MacDonald owns Amazon. Jon Quast owns PayPal Holdings. The Motley Fool owns and recommends Amazon, MercadoLibre, PayPal Holdings, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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