Curiously, well-known crypto-skeptic Warren Buffett may soon become a backdoor cryptocurrency investor

It is well known that legendary investors Warren Buffett and Charlie Munger are not fans of the growing crypto movement. The two, who lead the large conglomerate Berkshire Hathaway (BRK.A 3.20%) (BRK.B 3.36%)have made a number of public statements about their dislike and distrust of Bitcoin and other cryptocurrencies.

One of the main reasons why Buffett doesn’t like Bitcoin is that it doesn’t produce anything tangible. Buffett also said that he wouldn’t buy all the Bitcoin in the world for just $25 if he had the opportunity. Meanwhile, Munger has delivered his own tirade against Bitcoin and cryptocurrencies, calling them “stupid and evil.” He also said that crypto undermines the Federal Reserve system.

But in an interesting twist, one of the companies in Berkshire Hathaway’s large stock portfolio recently announced its plan to launch its own cryptocurrency, so if Berkshire continues to hold the stock, the conglomerate will essentially be indirect investors in a cryptocurrency. Let me explain.

Further innovation from this fintech bank

In mid-2021, Berkshire Hathaway made a private investment in the Brazilian digital bank Now Holdings (NOW 3.38%), which has been a major disruption in the Latin American banking market. Offering traditional banking products at lower fees and sleek digital experiences to make the banking system more accessible to Brazilians, the fintech bank has caught on and led to rapid growth. By the end of the second quarter of the year, Nu had more than 65 million customers and tapped approximately 36% of Brazil’s adult population.

Nu went public in late 2021, and Berkshire now owns more than 107.1 million shares, or roughly a 2.3% stake in the company. Nu is not the only Brazilian company Berkshire has invested in, and the country’s economy appears to have a bright future.

In a recent press release, Nu said it plans to launch its own cryptocurrency called Nucoin in the first half of 2023. The cryptocurrency will be built on top of Polygon blockchain network and will be distributed to customers for free. The goal of Nucoin is to “serve as the basis for the creation of a pioneering rewards program in Brazil.”

“We are opening a door to the future. Nucoin is a new way to recognize customer loyalty and promote further engagement with Nubank products,” Fernando Czapski, general manager of the project, said in a statement. “This project is another step forward in our belief in the transformative potential of blockchain technology and to democratize it even more, going beyond buying, selling and maintaining cryptocurrencies in the Nu app.”

Nu has moved beyond just a bank offering various lending products and bank accounts and has developed a multi-product platform to better engage with its customers. Nu now offers customers online investment options, payment options and an e-commerce marketplace where customers can shop. The likely thinking here is that if you can get customers to spend more time in the Nu ecosystem, they will be more likely to make Nu their primary bank, which typically results in more profitable customers using more products and services at the bank.

The difference between cryptocurrency and blockchain

There is obviously a difference between investing in cryptocurrency, which I think most investors can admit is difficult to truly value, and blockchain technology, which are the networks on which cryptocurrencies trade.

We know Buffett has no interest in investing directly in cryptocurrency, but that doesn’t mean he’s completely against blockchain technology and its potential use in businesses that produce something tangible. In fact, Buffett has publicly called blockchain technology “genius.”

My guess is that if Nu invested in Bitcoin himself, Buffett might not be so thrilled. But if it’s using cryptocurrencies as a way to engage customers and integrate them into the Nu ecosystem, where they can eventually open bank accounts or take out loans, I’m not so sure Buffett would have a problem with that.

There’s also a good chance that Buffett has very little to do with Berkshire’s investment in Nu. After all, Buffett gives his top investment lieutenants the autonomy to invest as they please. But overall, I think there is a clear distinction that the Buffetts see between investing in cryptocurrencies and embracing blockchain technology.