Digital Assets: Jack Dorsey’s Square Buys $50M of Bitcoin

October 9, 2020 | Digital Assets, News
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The company considers cryptocurrency as an instrument of economic empowerment.

Square (NYSE: SQ), the payments processing company co-founded by Jack Dorsey, just signaled a massive vote of confidence in bitcoin. It bought 4,709 bitcoins for $50 million, an amount equivalent to 1% of its total assets, or about 2.5% of its cash as on June 30. (Forbes)

Square becomes another major, listed company to invest in bitcoin. Previously, MicroStrategy (NASDAQ: MSTR) invested $425 million in bitcoin, to protect against the diminishing value of cash and looming asset inflation.

Shares in Square jumped 1.84% to close at US$ 183.50 on Thursday.

Square rationale

Dorsey himself is a long time crypto aficionado. However, the company intends to diversify its exposure to the US dollar given the economic turmoil.

“Given the rapid evolution of cryptocurrency and unprecedented uncertainty from a macroeconomic and currency regime perspective, we believe now is the right time for us to expand our largely USD-denominated balance sheet and make a meaningful investment in bitcoin,” the firm said in a whitepaper issued alongside its announcement.

“We view bitcoin as an instrument of global economic empowerment; it is a way for individuals around the world to participate in a global monetary system and secure their own financial future,”  it added.

Square modus operandi

Square went so far as to detail its investment process and custody plans in the whitepaper:

  • Purchased the bitcoin over-the-counter with a bitcoin liquidity provider that the firm currently uses as part of its Cash App bitcoin trading product.
  • Custody in cold storage via Subzero, its Hardware Security Module-backed solution for safekeeping cryptocurrencies
  • Crime insurance policy to protect against internal or external theft of bitcoin both in hot wallet and cold storage

Square’s Cash App

“We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” said Square’s Chief Financial Officer, Amrita Ahuja. “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”

Square’s Cash App is a launching pad for many retail investors making their first foray into cryptocurrencies.

During the second quarter, the company benefited from robust crypto trading by Cash App users. It reported a bitcoin revenue of $875 million, up 600% year on year. It earned $17 million gross profit from bitcoin trading.

Related Story:  MicroStrategy’s Labor of Love On Bitcoin

Image Credit: Flickr                                                   

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