With cryptocurrencies being adopted by several companies as a mode of payment, there is a rising excitement amongst crypto enthusiasts that the digital currency is moving towards mass adoption. The e-commerce giant Amazon has taken a different outlook towards cryptocurrencies. The company does not accept payment in cryptocurrency directly, but it has an application on its website (Purse.io) that connects people who want to receive Bitcoin with people who want to spend Bitcoin to purchase Amazon products.
Amazon has a 47% share in the US e-commerce market with an annual revenue of over $280 million. There are over 150 million Amazon Prime users – some of them being millennials and Gen Z who prefer Bitcoin over traditional banking systems. Thus, the acceptance of Bitcoin and other forms of cryptocurrencies by the e-commerce giant would mean a mainstream adoption of crypto for payments. In this article, we will discuss what will it look like for Amazon in the cryptocurrency arena.
Amazon is Looking for a Blockchain Expert
On July 22, Amazon posted a job looking for a “Digital Currency and Blockchain Lead”. The advertisement said:
“You will leverage your domain expertise in Blockchain, Distributed Ledger, Central Bank Digital Currencies and Cryptocurrency to develop the case for the capabilities which should be developed, drive overall vision and product strategy, and gain leadership buy-in and investment for new capabilities.”
This advertisement doesn’t exactly explain what kind of product will be developed by the new hire. The language seems a little bit vague and it’s not clear how Amazon will develop new capabilities. However, there were several newspapers and media outlets who took this too far and published headlines like “Amazon might soon accept cryptocurrencies for payments”.
Amazon has always been interested in the new crypto technology and it has on multiple occasions indicated that it might explore how its adoption will look for Amazon. However, it never gave a specific time frame. In 2013, it bought a domain named amazonbitcoin.com and then four years later it also added three more domains: amazonethereum.com, amazoncryptocurrency.com, and amazoncryptocurrencies.com. Although all these domains direct to Amazon’s main site (Amazon.com), the existence of such domains clearly reflects the interest of the company in crypto. Even then, there were similar headlines that Amazon is moving towards the adoption of cryptocurrencies. But they were dismissed quickly by Amazon.
An Insider’s Story
Soon after the release of the job advertisement, there were reports on several media outlets that an insider from Amazon has confirmed the adoption of cryptocurrency payments by the end of 2021. The insider (who is anonymous) mentioned that Amazon has fully discussed the idea of setting up cryptocurrency payment solutions. The insider even mentioned that the directive for doing so has come right from the top: Jeff Bezos himself. The story also suggested that Amazon might accept other modes of crypto payment like Ethereum, Cardano, and Bitcoin Cash after it has established a fast and secure method of Bitcoin payment. It also indicated that Amazon is thinking about its own digital token for 2022. On the very next day of this story, Amazon denied any news reports that claimed it was looking to accept Bitcoin payments by the end of the year. A spokesperson said that while the company has always been interested in cryptocurrencies, the specific speculations about its plans are not true.
Entry of Other Major Players
Despite Amazon’s apprehensions, there are several other big players that have already entered the world of crypto. In October 2020, PayPal announced that it will allow its users in the US to buy, sell, and hold cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. It partnered with Paxos Crypto Brokerage to provide crypto custody and trading—giving its users a unique crypto experience. It has also wonderfully tackled crypto’s volatility problem as it automatically converts crypto payments to fiat at the point of sales.
Besides PayPal, Tesla is also investing a lot in Bitcoins and other cryptocurrencies. In February 2021, Tesla invested around $1.5 billion in Bitcoin. This announcement skyrocketed the value of Bitcoin to $43,000. Then further in March, Tesla announced that it will accept Bitcoin as a mode of payment, which means US customers can purchase cars with their Bitcoins. Tesla, however, took a different approach from PayPal as it might not convert Bitcoin to fiat at the point of purchase.
Considering all these major companies adopting crypto, Amazon may be a little slow on this path. Since Amazon has a thin profit margin – just 5.5% in 2020 – adopting Bitcoin would make it susceptible to its high rates of volatility. And if it settles Bitcoin payments to fiat at the point of sale through a cryptocurrency gateway, it will lose a small chunk of money with each purchase. Bitcoin payment is also a direct competition to its own payment processing service, i.e., Amazon Pay. What might be possible is that Amazon uses Bitcoin as a store of value rather than a payment gateway. But there are definite barriers to the adoption of cryptocurrency by Amazon. One of the prominent ones is Bitcoin’s inability to scale. The number of transactions on Amazon can go as high as 636 per second. Currently, the best Bitcoin can do is 7 transactions per second, which means it won’t be able to meet the needs of the company and its customers.
This does not mean that all is grey at Amazon when it comes to crypto. In February, Amazon announced that it is hiring developers and engineers for a digital currency project in Mexico. This project will develop a new payment product that will allow customers to convert their fiat cash into digital currency —which customers can use to buy online merchandise or services like Prime Video. Although there are not many details available about this project, it seems that Amazon is experimenting within this space. It already has its own digital currency called Amazon Coins, which can be used for a variety of purposes like games, apps, and in-app items. This definitely reflects the interest of the e-commerce giant in the new technology. To learn more about which companies are investing in cryptocurrencies and how they are using them to benefit their businesses, visit our blog today!