Square Views Bitcoin as an Investment

In mid-November 2017, Square (SQ) started allowing a small number of users of its Square Cash app to trade bitcoin. The company expanded the ability to buy and sell bitcoin on its network to Square Cash users in early December, saying in a tweet that it was rolling out bitcoin to “more of our most active customers.”

Square Cash app is a person-to-person (or P2P) payments platform that also supports the withdrawal of funds through bank ATMs. Square’s new service operates like a bitcoin exchange that lets Square Cash users buy and sell bitcoin directly from the Square Cash app. Bitcoin purchases are held in the mobile wallet in the same manner that cash balances are held.

Unlike cash, Square initially doesn’t allow person-to-person transfer of bitcoin in the Square Cash app. The restriction on bitcoin peer transfers appears to underscore Square’s view of the cryptocurrency as an investment rather than a means of payment.

For Square, supporting bitcoin trade on its platform matches its belief that cryptocurrency can expand the participation of individuals in the global financial system.

US (SPY) mobile P2P payments volume is forecast to hit $120.4 billion this year and more than double to $244.0 billion by 2021, according to eMarketer. Square with its Square Cash app, PayPal (PYPL) with its Venmo app, Apple (AAPL) with Apple Pay Cash, and JPMorgan Chase (JPM) and Bank of America (BAC) with their Zelle app have their eyes on the P2P payments market.

As competition in the P2P payments market heats up, the bitcoin exchange service might help Square add value to its Square Cash app.