And other milestones in crypto’s mass adoption
It seems like ancient history now, but there was a time when all Bitcoin could buy you was pizza. You may have heard the story, but back in 2010, a Florida man spent 10,000 bitcoins on two Papa John’s pies. It’s considered the first real-world transaction involving crypto.
(We’ll just skip the part about how many Papa John’s franchises he could purchase with all that BTC today.)
It’s amusing to look back on, but in its infancy, crypto dealt with a major dearth of mainstream adoption. With close to zero banks and retailers accepting Bitcoin and other digital currencies as payment, it was awfully difficult for investors to do anything but HODL their precious coinage.
Clearly, a lot has changed.
Crypto nest egg?
Most recently, Fidelity became the first retirement provider to allow investors to add bitcoin to their 401(k) account. When you consider Fidelity held $2.4 trillion in US retirement assets in 2020 ― more than a third of the market ― the move can be a game changer in how people allocate crypto for their long-term investing strategy.
Expected to launch in mid-2022, Fidelity’s Digital Assets Account will become available to plan users just like any other mutual fund, in which investors can elect a certain amount of salary contributions (reportedly capped at 20%) for bitcoin holdings. Accounts would be valued on a daily basis and held on Fidelity’s own custody platform to ensure “institutional-grade security.”
It will depend, however, on the 23,000 plan sponsors (i.e., companies using Fidelity) and whether they choose to make the Digital Assets Account available to their employees. So far, software firm MicroStrategy has signed on to offer the bitcoin option to plan participants, which should come as no shock. MicroStrategy CEO Michael Saylor is a huge crypto advocate, and the company has billions in BTC on its balance sheet.
Will Fidelity’s other sponsors follow suit? It all depends on their crypto comfort level, but as recent history has shown, adoption among US companies is on the rise. Fidelity has been involved in crypto for nearly a decade, having gotten into mining in 2014 before first offering digital asset trading to its institutional investor clients in 2018.
And they aren’t the only major US financial institution that has backed (or warmed up to) crypto adoption in the last decade.
Crypto and credit cards
Two of the four major US credit card networks ― Visa, Mastercard, American Express, and Discover ― currently enable crypto transactions through partnerships. Visa, the largest card network in the US, tallied $2.5 billion in payments from its crypto-linked cards in the first quarter of 2022 alone. Mastercard, which began supporting crypto transactions on its network in 2021, has positioned itself as a “crypto first firm” according to EVP Jess Turner.
While the other two have been slower to the take, both payment giants have expressed legitimate interest in the space. Amex is exploring crypto rewards programs and a potential journey into the metaverse, while Discover announced its plans for a crypto product roadmap in 2021.
Despite the more wait-and-see approach of Amex and Discover, it goes without saying that the impact can be huge if all four major networks embrace crypto wholeheartedly. Being able to seamlessly use your credit card for crypto transactions is a big piece of the puzzle, as far as mass acceptance with all types of US retailers.
Big banks buying bitcoin
Once considered allergic to crypto, Wall Street has also pulled a major 180 in recent years. Major investment firms including Goldman Sachs, Morgan Stanley, and Wells Fargo have begun offering crypto exposure to their commercial banking clients through several derivatives, including options, futures, or ETFs.
Why have they changed their tune? While big banks were slow to embrace crypto, their high-profile clients were demanding it. Many sought digital currency investments as a means to hedge against inflation and diversify their portfolios with the new frontier of asset classes. Seeing as the customer is always right, major firms have flocked to crypto not only through client offerings, but by expanding their headcount with research and development teams dedicated to digital currencies and blockchain technology more broadly.
Bottom line
It’s not just credit card and investment banking giants that have begun to embrace crypto in the financial space. Payment services like Paypal and Apple Pay have made it easier for consumers to use and merchants to accept crypto. Even on the retail side, there have been major adoptions. Overstock.com has been accepting bitcoin since January 2014(!), while top companies like Microsoft, Whole Foods, and Home Depot all have means to convert your crypto into usable cash.
At the end of the day, no one is forcing these major financial institutions and Fortune 500 companies to adopt crypto. They can simply say no. But whether it’s their own infatuation or inescapable customer demand, inevitably, (diamond) hands will be forced.