Good morning, and welcome to Protocol Fintech. This Wednesday: The App Store tax expands to NFTs, Meta Pay scores a win, and Bill Harris explains Elon Musk’s X obsession .
Off the chain
I’m old enough to remember when Amazon, courting web-wary customers in the ’90s, let them call an 800 number and read their credit card numbers off to an operator. It’s been an innovator in payments since then, dating back to its purchase of Accept.com, the operation that eventually became Amazon Pay. If there’s one thing that’s held it back in payments over the decades, it’s a failure to play well with others.
So I think it’s a big deal that PayPal and Amazon just struck a deal for Amazon to accept Venmo. The most likely customers here are Venmo merchants who want to spend their balances right away rather than wait to sweep the funds into their bank accounts. But it also looks to me like a toehold for future dealmaking: The real win is when PayPal’s eponymous service gets accepted at Amazon, opening up Amazon’s customer base to its pay-later products. It’s a deal that would have been unthinkable back when eBay, once Amazon’s arch-enemy, owned PayPal. But times have changed, and Amazon shows signs of changing, too.
— Owen Thomas ( email | twitter )
A tax too far?
Apple released new rules for the App Store this week, which could have major implications for NFTs and crypto payments companies. The rules confirm that the App Store’s fees on digital goods would also apply to NFTs. People are already touchy about Apple’s fees — it’s the same reason Epic Games has sued Apple , my colleague Nick Statt points out — but the idea of applying the App Store tax to crypto products has really riled some people up.
Apple is welcoming NFTs, which is big for the industry. But reading the fine print is crucial. Beyond the fees, Apple has made other rule changes that affect the tokens.
- Apple made it clear for the first time that apps can mint, list, and transfer NFTs in their apps. And apps can sell NFTs in their apps. That’s a positive for the NFT market.
- However, purchases of the NFTs must go through the App Store, which has a number of implications. That means that payments must be done in fiat since the App Store doesn’t accept crypto. The rules explicitly prohibit buttons, links, or other ways that customers can purchase outside of the App Store.
- That would appear to rule out other ways that consumers can purchase crypto and NFTs on crypto apps through crypto payments providers such as Wyre, Transak, or MoonPay.
The real effect may be to steer crypto app developers away from iOS. Since they’re so new, it’s unclear if the rules will limit their interest.
- One scenario: While NFTs may become more common on iOS apps, some developers might opt to keep them in web browsers. Or they might just limit their iOS apps to avoid the App Store’s fees, which run as much as 30% on transactions. OpenSea, the biggest NFT marketplace, does not allow in-app purchases on its iOS app.
- In addition, the new Apple rules prohibit the use of NFTs to “unlock features or functionality within the app.” This type of token-gated content or commerce has become an area of interest for a range of companies in ecommerce, gaming, and online communities.
- Shopify recently launched a token-gated commerce effort , which Alex Danco, head of blockchain at Shopify, told me this summer would bring new forms of loyalty and new experiences for consumers. It has worked with NFT projects such as Doodles and Cool Cats. Shopify declined to comment on Apple’s new NFT rules.
- Other apps and games that use NFTs to access parts of the app or game play would also appear to be affected. For example, Stepn and YDY are sweat-to-earn apps in which consumers connect an NFT to earn tokens for working out. The content of the app is dependent on a connected NFT, which Apple might view as a token-gated setup. Stepn declined to comment. YDY CEO Jason Baptiste said Apple’s recognition of NFTs was “a big step” but there are unanswered questions that won’t be resolved “until we start seeing new App Store reviews using these rules.”
Apple has opened up a can of worms. It’s not the first time Apple has attempted to expand its definition of what constitutes digital goods for which it charges App Store fees. In 2020, Apple asked Eventbrite to pay its 30% fee when classes went online due to COVID-19. Meta, which was at the same time launching an online events service, criticized Apple for charging the fee, saying it hurt event organizers at a time when they were already suffering. Apple’s policies on online events and ticketing could collide with its new NFT rules, since companies like Ticketmaster are either planning to or already using NFTs as tickets for physical events. Apple doesn’t charge fees for real-world tickets. But what if the NFT is a digital good that unlocks the physical ticket? It’s exactly that blurring of the lines between the real world and the digital that NFTs promise, and Apple’s attempts to draw sharp divisions may stumble here.
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On the money
A16z is taking a big hit from its crypto bets. The firm’s flagship crypto fund shed around 40% of its value in the first half of this year, The Wall Street Journal reports .
Fundbox has cut 40% of its staff. The fintech lender to small businesses laid off about 140 employees in its U.S. and Israel offices.
FTX is raising money. CEO Sam Bankman-Fried confirmed at The Wall Street Journal’s Tech Live conference that it’s in talks with investors, and could use the funds to expand its reach among retail crypto traders.
On Protocol: Caroline Butler, CEO of BNY Mellon’s custody services, explains why it’s getting into crypto.
Meta Pay is now available through JPMorgan Chase. J.P. Morgan Payments merchants can add Meta Pay — the former Facebook Pay — to their websites as a checkout option.
A record number of Americans have bank accounts. About 4.5% of Americans — roughly 5.9 million households — were without a bank account in 2021, the lowest level since the FDIC started tracking the data in 2009.
Sen. Elizabeth Warren wants to know why former regulators keep joining crypto firms. Warren and a group of other progressive lawmakers wrote to several agencies asking how to stop the "revolving door" between crypto and the government.
Matt Levine has 40,000 words to say about crypto. Bloomberg Businessweek dedicated its entire latest print issue to the finance writer's piece, " The Crypto Story. "
Companies are citing the Fifth Circuit's ruling to challenge CFPB enforcement. The court's ruling that the CFPB's funding structure is unconstitutional is already an enforcement headache for the agency.
Overheard
Kim Seo-joon, CEO of Hashed , a VC firm that invested in Terraform Labs and suffered big losses from the failure of its luna cryptocurrency, was reportedly a no-show at a hearing of the Korean National Assembly’s Political Affairs Committee about the debacle. "After the luna-terra incident, I was under extreme stress, and my health deteriorated and I needed to stabilize,” he said in a statement.
Just one question for … Bill Harris, CEO, Nirvana Money
Harris just launched Nirvana Money, a fintech that aims to rebundle fragmented financial services into a single, easy-to-use account. Before that, he was the first CEO of PayPal and founded Personal Capital and several other fintechs. He was also CEO of Intuit.
Why might Elon Musk be thinking about creating a super app with Twitter called X?
First of all, I have no idea. The only thing that I can comment on is the letter X has been a fascination of Elon’s as long as I’ve known him. In fact, the original name when Elon and I partnered to start PayPal was X.com. That was Elon’s: He had purchased that domain. It was [one of] the only one-letter domain[s] in the world because whoever was managing domain names pretty early on made the decision that there would not be single-letter domains on the .com TLD. But somehow X slipped out, he got it, and because it was special, that’s what we used. And I think that was the genesis of his fascination with the letter X.
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