Nubank Suspends Trading of Its Cryptocurrency Nucoin
Nubank, Brazil’s largest fintech bank, has announced the suspension of trading for its cryptocurrency, Nucoin, to protect users from potential market volatility.
Details of the Suspension
On September 10, 2024, Nubank revealed in a blog post that trading of Nucoin has been halted immediately. Introduced in late 2022 on the Polygon blockchain as part of a rewards program, Nucoin will now be used solely for accessing benefits and rewards within the Nubank ecosystem, such as discounts at Nubank Shopping and exclusive offers. The bank explained that this move aims to prevent fluctuations in Nucoin’s market value.
Customers will still have the option to exchange their Nucoins for Bitcoin or digital dollars (USDC) until December 9, 2024. Additionally, Nubank plans to hold raffles with prizes of up to R$1 million for those redeeming their coins.
Underlying Issues
The decision to suspend trading comes amidst growing scrutiny of Nubank’s financial stability. Although the precise reasons for the sudden policy change are not fully clear, it aligns with concerns about the bank’s financial health, including rising non-performing loans and asset quality issues.
Financial Challenges
Despite a 60% increase in Nubank’s stock price this year, some analysts have questioned the stock’s value, labeling it as “overvalued.” According to a Bloomberg report, Nubank’s non-performing loans, overdue by 90 days or more, hit a record 7% in the second quarter, exceeding the industry average of 5.5%. The bank has also reduced its provisions for bad debts from $831 million to $760 million.
Fernando Fontoura, a portfolio manager at Persevera Asset Management, attributed the firm’s decision to sell its entire Nubank position to concerns about credit quality. In June, Persevera exited its investment, citing it as “crowded.” Additionally, JPMorgan Chase and UBS downgraded their ratings for Nubank to “neutral” in July, pointing to worsening asset quality.
Nubank’s executives have defended their practices, with Chief Operating Officer Youssef Lahrech emphasizing a focus on long-term strategies over short-term non-performing loan metrics. The bank’s press office countered the concerns, asserting that the criticisms do not reflect the broader Wall Street perspective and that Nubank’s approach to loss provisions differs from the Brazilian Central Bank’s methodology.
In summary, while Nubank’s halt of Nucoin trading is intended to mitigate market volatility, it is occurring amid significant financial scrutiny and evolving market challenges.
