It creates a lot of attention when an online retailer starts accepting crypto, in fact, it’s the dream of many that one day Amazon will start accepting Bitcoin. But the opposite is true when an online retailer asks merchants to takes down crypto listings from their site. The primary reason is that an online retailer can reach a huge crowd compared to other avenues. This is precisely the reason many were disappointed when a Latin American e-commerce giant, MercadoLibre, announced that it’s going to ban cryptocurrency related listings.
MercadoLibre prepares to fight
MercadoLibre is an e-commerce company having a presence in over 20 Latin American countries but has recently come under attack from competition, especially Amazon in its main market Brazil. Amazon is known to enter a space and aggressively compete to drive out the competition, entry of Amazon usually creates panic with others in the market. MercadoLibre, unlike other companies, is not waiting around for Amazon to make its move, but have rather decided to fight the competition proactively. In order to do this, they have made $1.85 billion investment in logistics and in fintech and payment solutions. The company has been on a fundraising spree raising over $1 billion dollars by offering common stock priced at $480 per share making the largest equity sale in over a decade by an Argentine firm. The sale also saw PayPal agreeing to make a $750 million investments.
RIPIO partnership
During the last year during the heydays of crypto and ICO, MercadoLibre announced a partnership with a crypto wallet company RIPIO. The partnership saw users of MercadoLibre being able to withdraw received funds directly in Bitcoin. This was a first among major online retailers in the region. This made sense to the company as fueled by both the economic and political unrest the adoption of crypto has seen a large increase. Offering to withdraw funds directly in crypto was a way of attracting more users to the platform.
Paypal funding
In the recent fundraising done by MercadoLibre, strategic investment around $750 million was promised by Paypal. Paypal won’t take up an active role in the day to day operations of the company, it won’t also attend or take part in board meetings, rather the two companies will collaborate in areas like fintech integrating Paypal’s global knowledge into local operations. After a few days of the funds being promised by Paypal, MercadoLibre through an email announced to its sellers that all crypto related listings will be removed from its platform. The timing of the withdrawal seems suspicious as many speculated that Paypal could be the reason behind the move.
What now?
The move by MercadoLibre was both a surprise and a shock to many. The company has given time till March 19th, afterward, the crypto listings will be automatically removed. This is not the first time the company has taken action against ads related to crypto but the blanket ban with no official reason has left some people clueless. This has affected thousands of vendors, for example in Brazil there are over 5,630 Bitcoin-related ads and over 9,320 cryptocurrency-related listings. Also, the mail sent by the company is very vague, there is no course of action mentioned, just that the listings will be removed and it does not mention about the ability of sellers to withdraw funds directly in Bitcoin.
In a region like Latin America where the usage of crypto is increasing substantially due to political and economic instability, dumping crypto doesn’t make sense, at least from a business perspective. Especially in the face of stiff competition put by Amazon and other online retailers, offering crypto listings can draw more crowd giving an edge. No official reasons were given this time but the platform has previously banned ads and products related to the crypto pointing to various reasons like fraud, illicit activities, and user security. But many have speculated Paypal might be the reason for such sudden actions as many analysts have pointed out in the past that crypto is a potential disruptor to PayPal’s business model.
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