Square, the payment processor co-founded by Twitter CEO Jack Dorsey, is testing support for the electronic currency bitcoin in its Cash app. The company’s pilot program lets a small number of customers buy and sell bitcoin, but doesn’t let individuals or businesses make payments with the cryptocurrency, CNBC reported.
The test was first discovered by Twitter users who stumbled across the option to buy and sell bitcoin with Square’s Cash app, which lets users make peer-to-peer payments connected to a bank account. Cash app users can also order a plastic Square Cash Card for payments to merchants and retailers with the funds in their Cash app.
A spokesperson said Square decided to test the buying and selling of bitcoin based on customer interest. "Cryptocurrency can greatly impact the ability of individuals to participate in the global financial system and we're excited to learn more here," a Square spokesperson told TechCrunch, which first reported on the test.
While there are still a lot of questions around bitcoin, the consensus appears to be that the blockchain technology it is based on will be here for the long haul, meaning any company that processes transactions will have to come to grips with the electronic currency that can be “mined” with software to process transactions that are grouped into blocks of computer memory and linked by a digital chain.
As mobile's role in banking, investments and online purchasing continues to grow, bitcoin could play a crucial role, giving it the potential to disintermediate those who don't start experimenting with the electronic currency soon. More broadly, the marketing industry is beginning to investigate how blockchain can support the digital media supply chain.
Square needs to dip its toes into the cryptocurrency waters to develop the capacity to handle bitcoin and prepare for the possibility of its wider acceptance as a medium of exchange. Square also has the possibility of earning fees from the burgeoning industry of buying and selling bitcoin. Coinbase is the leading U.S. provider of bitcoin services, with a customer base that has more than doubled this year to 12.5 million users. It has exchanged $40 billion of digital currency, according to its website.
One of the biggest criticisms of bitcoin is how slow transactions are handled with the currency, especially compared with established financial networks and payment processors like Visa and MasterCard. While the transactions are instant, they need to be propagated throughout the blockchain, which takes more time. That limitation has led to the development of Bitcoin Cash to speed up peer-to-peer payments and get them confirmed quickly.
The cryptocurrency has plenty of naysayers who don’t consider bitcoin as a legitimate medium of exchange. Others cite its use for money laundering and illicit transactions as negative. Finally, many observers fret that bitcoin is the latest asset bubble after its value has surged ninefold to more than $7,000 a coin in the past 12 months. That surging value reinforces the idea that bitcoin should be hoarded instead of used for transactions, another hindrance to its wider acceptance. Meanwhile, bitcoin’s proponents say the cryptocurrency has a limited supply that will be a store of value like precious metals, especially as central banks like Federal Reserve keep expanding the money supply every time there’s a financial crisis or economic slowdown.