Key takeaways:
- Tether has invested $20 million in Argentine digital bank Ualá as part of the fintech’s $197 million funding round announced in March
- Ualá’s CEO says regulatory constraints in Argentina and Mexico mean there will be no near-term integration of Tether’s USDT stablecoin
- The deal adds to a string of recent Tether investments across Latin America, including stakes in Belo and Mercado Bitcoin
Tether has invested $20 million in Argentine digital bank Ualá, deepening its push into Latin America as the issuer of the world’s largest stablecoin expands beyond digital assets.
The investment forms part of Ualá’s $197 million funding round announced in March, which the company plans to use to accelerate growth and expand its financial ecosystem across Argentina, Mexico and Colombia.
Ualá founder and chief executive officer Pierpaolo Barbieri said regulatory constraints in Argentina and Mexico rule out any near-term integration of Tether’s USDT stablecoin into the platform.
“We always want to stay at the forefront of new products, but today we are a bank in all of our markets, and given the regulatory environment in Argentina and Mexico, there won’t be any type of stablecoin integration,” Barbieri said. “Tether is joining solely as a financial investor.”
Tether, which has $184 billion of tokens in circulation, has made a series of investments across the region in recent months. In April, the company led a Series A round for Argentine crypto platform Belo, and earlier this month it announced an $18 million investment in Brazilian crypto exchange Mercado Bitcoin.
Beyond crypto, Tether took a controlling stake last year in South American agricultural company Adecoagro, part of a broader deal spree that has included investments ranging from brain-implant technology to sports.
Tether joins a roster of Ualá investors that includes Allianz X, which led the company’s most recent funding round, alongside Stone Ridge Holdings Group, Tencent Holdings, Soros Fund Management, Table Holdings and D1 Capital Partners. The March financing valued Ualá at $3.2 billion. “Ualá’s growth reflects the enormous demand across the region for financial services that are more accessible, efficient, and designed around the needs of consumers,” Tether chief executive officer Paolo Ardoino said in a statement.
Argentina’s credit market shows signs of recovery
Ualá’s 11 million customers across the region are concentrated in Argentina, where banks and fintechs have grappled with rising delinquencies after a rapid expansion in credit last year was followed by soaring interest rates ahead of midterm elections. Private-sector lenders pulled back on credit growth as household loan quality deteriorated.
Barbieri said Ualá’s delinquency rates have declined over the past seven months and that its Argentine operation should return to break-even within the next one or two months as credit quality improves, freeing up more capital to direct toward growth abroad.
Mexico’s cash-heavy market is the next growth target
Founded in 2017, Ualá’s expansion is increasingly centered on Mexico, where the company sees significant room to gain market share despite intensifying competition from banks and fintechs. Cash still dominates about 85% of small purchases in Mexico, one of the least-digitized payments markets globally.
“Mexico is an extremely young market compared to Brazil, a regional pioneer, and Argentina, which has undergone significant digitization in recent years,” Barbieri said. “There is competition in Mexico, certainly, but the total addressable market is infinite.”
Barbieri said the company is taking a cautious approach to lending in Mexico while focusing on new products, including a recent launch allowing customers to invest in U.S. stocks and ETFs.
He declined to estimate when the business will reach break-even in Latin America’s second-largest economy.