Hello there, this is Spencer Soper in Seattle. The cryptocurrency markets rallied this week on a rumor: That Amazon.com Inc. would soon accept crypto as payment on its platform. Amazon said on Monday that the “speculation” about its “specific plan for cryptocurrencies is not true,” but the suggestion was enough to move billions in crypto market value.
The episode began last Thursday, when Amazon posted a job listing for a "digital currency and blockchain product lead" on its “payments acceptance” team. News reports about the listing triggered a sudden spike in the price of Bitcoin and other currencies, which didn’t fall back down to earth even after the company’s denial. Bitcoin is up about 25% since Friday, when Insider first reported the job posting.
Why the wild price swings after a single job post? Amazon wouldn’t be the first large company to accept cryptocurrencies. And hiring one person out of 1.27 million global employees may not be indicative of an imminent major initiative.
But the fact that the world’s largest retailer is exploring crypto has big implications for the shadowy and often hard-to-access market. Interest from Amazon is read as a signal that the digital coins could one day graduate from fringe investments to everyday financial tools like cash and credit cards.
The ultimate use for digital currencies is still being hashed out. Right now, they've been accepted as an asset and positioned as an alternative to stocks or gold. Millions of Americans own at least some Bitcoin. Their use in day-to-day transactions, though, is still mostly a gimmick. Just 3% of consumers reported using Bitcoin to make a digital payment in 2020, up from 2% two years earlier, according to Forrester Research.
That could change if Amazon started accepting cryptocurrency. The company could set the standard for others to follow, like it did years ago with two-day shipping. Billions in quarterly revenue might conceivably become billions in crypto transactions.
Could it happen? There are plenty of reasons Amazon would want to expand into cryptocurrencies. Right now, there's more than $1.55 trillion held in various digital currencies, some of it just waiting to be exchanged for products.
"Amazon sees more than $1 trillion burning a hole in people's pockets," said Richard Crone, chief executive officer of payments consultant Crone Consulting. "Merchant acceptance, especially Amazon, makes it instantly redeemable. I can't do that with a stock or commodities."
Even though the share of payments is small, the demographics are enticing. Crypto users skew younger and spend more than those using credit and debit cards for digital transactions, according to BitPay, a payments platform that processes more than 100,000 cryptocurrency transactions a month.
And there’s already momentum toward actually using cryptocurrencies as currency. Payments platforms that help retailers accept Bitcoin and other digital currencies handled $1.42 billion in transactions in the three months ending in June, up 133% from the same period a year earlier, according to research firm Chainalysis.
Of course, there are also lots of reasons to remain skeptical. Using Bitcoin to buy a laptop on Amazon.com can trigger a "huge accounting headache" for shoppers, who will have to consider capital gains taxes when they redeem their cryptocurrency, said Nic Carter, a general partner at Castle Island Ventures, which invests in blockchain startups. Unless Congress enacts some kind of tax exemption for small transactions, he doesn't see crypto catching on as a payment tool.
"It's not very popular for e-commerce transactions because it's like liquidating your 401(k) to shop on Amazon," he said. "People have moved on from thinking of Bitcoin as a payments network and more like gold, a savings device." This week at least, it was probably a good investment. —Spencer Soper
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July 30, 2021 at 05:45PM
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