Brazil’s Nubank suspends trading of its cryptocurrency Nucoin

Fintech bank Nubank has announced the suspension of trading of its cryptocurrency, Nucoin.

This comes in a context of scrutiny on the bank’s financial stability.

Nubank policy change

In a September 10th blog post, Nubank revealed that effective immediately, Nucoin can no longer be bought or sold on its app. The cryptocurrency was launched in late 2022 on the Polygon blockchain as part of a reward program designed to provide users with various benefits.

It will now serve exclusively as an asset to unlock perks and rewards within its ecosystem. This includes discounts on Nubank Shopping and benefits on various experiences promoted by the bank.

“We have decided to suspend trading immediately to avoid possible fluctuations in the value of Nucoins in the market,” the post stated.

The bank added that customers will retain the option to exchange their Nucoins for Bitcoin or digital dollars (USDC) until December 9, 2024. Nubank will also hold raffles with prizes of up to R$1 million for those who choose to redeem their coins.

The exact reasons for the decision remain unclear, but the abrupt change in policy comes as the bank faces scrutiny over its financial health, including growing concerns about rising non-performing loans and the quality of its assets .

Increase in non-performing loans and asset quality

According to a Bloomberg report, despite the company’s shares having risen more than 60% this year, some analysts have expressed reservations, calling them “overvalued.”

Notably, Nubank’s non-performing loans, 90 days or more past due, reached a record 7% in the second quarter, beating the industry average of 5.5%. At the same time, the bank cut bad debt provisions from $831 million to $760 million.

Fernando Fontoura, portfolio manager at Persevera Asset Management, said those concerns about credit quality led the firm to distance itself.

In June, Persevera sold its entire position in the bank, calling it “stacked.” In addition, both JPMorgan Chase and UBS downgraded their ratings on Nubank to “neutral” in July, citing deteriorating asset quality.

The firm’s executives, however, have defended their lending practices. COO Youssef Lahrech explained during an earnings call that the bank prioritizes long-term strategies over short-term NPL metrics.

His press office also countered the report, saying the concerns raised did not reflect the general sentiment on Wall Street. They clarified that the data cited in the report, based on figures from the Central Bank of Brazil, uses a different methodology for loss provisions compared to Nubank’s approach.

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