CNBC reported that the popular payments app Venmo launched a credit card feature Tuesday to allow users to convert their cash-back rewards into bitcoin – free from transaction fees. Although not a proper bitcoin rewards system, Venmo provides interested users the option to have a buy order automatically executed upon receipt of any cash-back in their accounts. However, there are no signs of a bitcoin withdraw option being added to the app.
The new feature is not bitcoin-back but gives users an alternative to regular buying. Venmo charges its users a minimum of 50 cents for bitcoin purchases under $25 and a 2.3% fee from $25 to $100. The payments app charges a 2% fee for transactions between $100 and $200; 1.8% for orders between $200 and $1000; and 1.5% for all those above $1,000. But converting cash-back into bitcoin or other cryptocurrencies will be fee-free.
The development aligns with the broader strategy of Venmo’s parent company PayPal. The online payments giant is moving fast to capitalize on the growing adoption of bitcoin, seeking to reap revenue by charging conversion fees. This is further demonstrated by both companies’ policy of not allowing users to withdraw bitcoin – meaning, those who buy have to one day sell.
As Venmo and PayPal bring users to bitcoin but not the Bitcoin network, much is lost in sovereignty and decentralization – two central pillars of the peer-to-peer system. By denying individual sovereignty to their users, both companies affect two results that cancel each other out.
Yes, every time Venmo takes a step towards facilitating access to BTC, the company helps increase bitcoin adoption through its over 70 million users. However, as it keeps preventing those users from taking control of their funds, the payments app undermines both the adoption and the network. Without owning the private keys that can spend their bitcoin, Venmo and PayPal users alike would effectively own IOUs instead of actual BTC.