Venmo is letting its credit cardholders convert cash-back to crypto for free

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Venmo launched a credit card feature on Tuesday that allows users to convert their cashback rewards into Bitcoin and other cryptocurrencies.

The development is part of the more comprehensive crypto strategy of the Venmo parent PayPal. The company launched a cryptocurrency business earlier this year after introducing crypto trading to its customers last fall. This latest move offers an opportunity to usher in a wave of new cryptocurrency holders.

The new Venmo feature isn’t entirely crypto-back, but it’s only a step away from it. There are a number of credit cards ready to hit the market, like those from BlockFi and Gemini, which offer spending premiums in cryptocurrencies in hopes of putting crypto in people’s hands without getting them inside to invest.

Instead, Venmo lets cardholders set an automatic purchase for the cryptocurrency of their choice as soon as they receive their cashback reward when purchasing with the card. This conversion is free of transaction fees for customers and they receive the price of the cryptocurrency at the time of the conversion.

Bitcoin, Ether, Litecoin and Bitcoin Cash are available to Venmo’s 76 million users. Customers cannot yet remove digital assets from the platform, so any rewards converted to crypto will remain in their Venmo app unless they choose to sell them.

Robinhood, with around 18 million active users, offers royalty-free crypto trades. Coinbase, which is due to report its profits on Tuesday night, has some of the highest fees, at least for retailers. Coinbase has around 56 million users.

User growth and fee compression are the top metrics analysts expect from Coinbase’s earnings. For any cryptocurrency exchange deal, sales expectations are subdued as much of the second quarter was a bear market for crypto and cryptocurrencies are typically long-term deals. However, analysts told CNBC that they see user growth as a “critical health metric” for crypto exchanges.

For regular purchases and sales, Venmo and PayPal keep their tiered fee structure, which starts at 50 cents for transactions under $ 25. From $ 25 to $ 100, 2.3% is charged. It charges a 2% fee for transactions between $ 100 and $ 200; 1.8% for transactions between $ 200 and $ 1,000; and 1.5% for anything over $ 1,000.

Venmo’s cashback to crypto conversion program takes place during a week of even more exposure to digital currency in Washington.

The virtual currency industry suffered a blow in Congress on Monday when the crypto compromise change – which would have curtailed a proposal to increase state regulation of cryptocurrencies – was prevented from being incorporated into the infrastructure bill. Still, the debate over the nuances of cryptocurrency protocols legitimized the industry and educated lawmakers – a development many view as positive for crypto in the long term.

“Washington now views crypto as a real product that deserves government attention,” Cowen’s Jaret Seiberg said in a note Tuesday. “This is symbolically important to us as it tells us Washington is done looking for ways to end crypto.”

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