Cash App Discontinues Bitcoin Peer-to-Peer Transfers
In an unexpected move, Cash App, the popular mobile payment platform under Block, Inc., which is owned by Jack Dorsey, has decided to end its peer-to-peer Bitcoin transfer feature using $cashtags by December 20, 2024. This decision follows months of federal investigations into Block's compliance practices, spotlighting the app's approach to managing risk and regulatory obligations.
The announcement was quietly posted on Cash App's help page, catching many users off guard. The cessation of this feature does not extend to other services like sending stocks or cash through cashtags, indicating a targeted adjustment in their offerings related to cryptocurrency. According to Cash App, users can still utilize Bitcoin through the Lightning Network or the Bitcoin blockchain, suggesting a strategic pivot rather than a complete withdrawal from the crypto space.
Cash App's decision seems to be driven by a desire to concentrate its resources on Bitcoin. This move comes in the shadow of scrutiny from federal authorities over compliance risks, particularly concerning money laundering prevention. Reports from earlier in the year highlighted how Cash App's design might inadvertently facilitate such risks, with internal documents revealing transactions linked to sanctioned countries like Russia, Iran, Cuba, and Venezuela.
Moreover, the regulatory landscape has not been kind. In 2021, the European arm of Cash App faced directives from the Bank of Lithuania to tighten its customer verification processes to combat money laundering and terrorist financing. These ongoing regulatory challenges might have influenced Cash App's recent strategic decisions, though the company insists the change in Bitcoin transfer policy is not directly connected to these investigations.
The impact on Cash App's user base remains somewhat ambiguous. With 56 million active accounts as of December 2023, and considering the profitability of the crypto segment (generating over $65 million in Bitcoin gross profit in Q4 2023), the decision could potentially alienate users who valued the ease of sending Bitcoin directly via $cashtags. Additionally, by forcing users to the Lightning Network, it may further upset users as the Lightning Network experience is awful. Meanwhile, fees on the base Bitcoin blockchain remain volatile.