Venmo, a PayPal subsidiary, has launched a feature called "Cash Back to Crypto" that allows users to automatically buy cryptocurrency.
Venmo announced on Tuesday the launch of a credit card functionality that allows users to convert their cash-back rewards into bitcoin and other cryptocurrencies.
The move is part of PayPal's bigger crypto plan, which includes Venmo. After providing crypto trading to its consumers last fall, the corporation formed a business section dedicated to cryptocurrency earlier this year. This next step gives it the chance to attract a slew of new bitcoin investors.
The new Venmo function isn't yet crypto-friendly, but it's getting there. There are a number of credit cards on the horizon, such as those from BlockFi and Gemini, that will offer spending rewards in cryptocurrency, with the hopes of getting crypto into the hands of consumers without forcing them to invest in it.
Instead, Venmo allows cardholders to set up an auto-buy of their preferred cryptocurrency as soon as they receive their cash-back reward after making a purchase with the card. Customers will receive the price of the cryptocurrency at the moment of conversion, which is free of transaction costs.
Venmo's 76 million customers can use bitcoin, ether, litecoin, and bitcoin cash. Customers are unable to move digital assets off the platform at this time, so any incentives converted to cryptocurrency will remain in their Venmo app unless they choose to sell them.
Robinhood, which has around 18 million active members, provides fee-free cryptocurrency trading. At least for retail traders, Coinbase, which is set to disclose profits Tuesday evening, has some of the highest fees. Coinbase has a user base of around 56 million people.
The two measures analysts are looking for from Coinbase results are user growth and fee compression. Since much of the second quarter was a bear market for crypto, and cryptocurrencies tend to be long-term trades, revenue projections for any cryptocurrency exchange business are muted. Analysts, on the other hand, told CNBC that user growth is a "essential health" statistic for crypto exchanges.
Venmo and PayPal keep their tiered charge system for everyday buying and selling, starting at 50 cents for transactions under $25. It charges 2.3 percent on amounts between $25 and $100. It charges 2% on transactions between $100 and $200, 1.8 percent on transactions between $200 and $1,000, and 1.5 percent on purchases over $1,000.
Venmo's cash-back to cryptocurrency conversion initiative comes at a time when digital currency is gaining traction in Washington.
The crypto compromise amendment, which would have curtailed a proposal to enhance federal regulation of cryptocurrencies, was stopped from being included to the infrastructure bill on Monday, dealing a setback to the virtual currency industry. Nonetheless, the argument over the complexities of bitcoin protocols legitimised the business and educated policymakers, which many see as a long-term advantage for cryptocurrencies.
In a note published Tuesday, Cowen's Jaret Seiberg stated, "Washington now perceives crypto as a serious product worthy of government attention." “To us, that's symbolic because it means Washington has given up on finding a method to end crypto.”
