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I heard that phrase—“Square is a beast”—two years ago from a venture capitalist who invests in payments and fintech firms. He was sure Jack Dorsey’s other company (Dorsey is better known as the CEO of Twitter) was on its way to becoming a financial behemoth.
I thought of the VC’s remark yesterday when Square announced a new line of payroll services that will let companies pay their workers through Square, and let workers get paycheck advances of up to $200. Those arrangements offer businesses more flexibility with their capital. They will also let workers get paid quicker, since payroll arrangements will not have to rely on the conventional banking system, where payments take days to process.
The key to all this is Cash App. Launched in 2013, Cash App began life as a Venmo-like app to transfer money among friends. The millennial money-mover has since evolved into a full-blown banking service that offers direct deposit, debit cards and more. The app has also turned into a cash machine for the company, earning $281 million in gross profit for Square last quarter while it grew to 30 million users.
By adapting Cash App to provide payroll services, Square is poised to muscle onto the turf of ADP and other HR giants. In the longer term, it could use the app to move into fields like tax or investment advice. Cash App already offers tools to buy stocks and cryptocurrency.
Meanwhile, Square has already built up a healthy business providing loans to its business customers—letting them borrow against the sales that come in through payments on its growing array of hardware terminals. (Did you know Square sells $800 cash registers?)
These are huge advances for a company that made its name helping farmers’ market vendors accept card payments via their iPhones. From this early niche, Square built out a business that now resembles Apple’s multi-tentacled eco-system—one that uses a piece of hardware to lock customers into an array of other products and services. On top of all this, the company is benefiting from consumers’ growing aversion to cash in the pandemic era. Little wonder Square’s share price has climbed 150% this year.
Square’s emerging financial fortress is far from secure though. The company is not the only one that wants to parlay a cash transfer app into a banking empire—PayPal is rushing to do the same with its Venmo app. Meanwhile, quiet giant Shopify is leveraging its website-as-a-service business to offer financial products to its millions of merchant customers. And tech giants Apple and Google have payments empires of their own, which they could adapt to poach customers from Square.
But none of these rivals currently possess a two-sided payments business—providing banking-like services to both consumers and businesses—on the scale of Square. That’s why, for now, the company is the beast to beat.
Jeff John Roberts
Kraken crypto exchange wins U.S. bank charter ... U.S. Conference of State Bank Supervisors agrees to unify crypto and fintech rules ... Ethereum 2.0 could launch in November ... SushiSwap chef returns cashed-out funds ... Kodak cleared in loan inquiry, by investigators it hired ... ECB to seek comment on digital currency ... Coinbase's USDC stablecoin surges ... The (virtual) Oslo Freedom Forum starts September 24 ... MicroStrategy CEO explains his big bet on Bitcoin ... A new role-playing game runs on Litecoin.
JPMorgan work from home policy lowered productivity on certain days ... Ray Dalio warns of threats to dollar's reserve status ... Rapper T.I. fined $75,000 for promoting fraudulent ICO ... Hacked crypto exchange accuses Binance of laundering the proceeds ... Big crypto exchanges scramble to catch up to DeFi ... U.S. tax compliance costs nearly 1% of GDP.
The amount of liquidity already parked in Sashimiswap, an "upgraded and simplified" fork of the decentralized exchange SushiSwap. Those really paying attention will note that SushiSwap was itself already a fork, or lightly modified copy, of the code behind 'liquidity protocol' (a.k.a. trading platform) Uniswap. Crypto and DeFi are fundamentally wed to open-source software (if you can't audit the code, you can't trust it), but that's a double-edged sword. Some forks may indeed add meaningful innovations, but a continuing stream of forks will dilute everything from capital to the developer talent pool. Which edge of the sword Sashimiswap represents remains to be seen.
FOMO NO MO'
"When you’re trying to avoid getting served for a [multi-billion dollar] fraud case, maybe lay off outlandish presidential campaigns."
Lawyer James Koutoulas, on the travails of erstwhile Block.One executive, former Mighty Duck, and occasional hat-wearer Brock Pierce. Koutoulas' team served Pierce papers in litigation over the 2017 EOS token sale during a rally for Pierce's Presidential campaign, which is ongoing despite Pierce having failed to meet deadlines for ballot inclusion in several states. This probably doesn't rank among the ten oddest moments in Pierce's life, which has included a complicated history in Hollywood and an attempt to turn Puerto Rico into a cryptocurrency haven. As for the EOS token sale, you can understand early investors' frustration—the project has failed to become a meaningful competitor to Ethereum during the DeFi boom, and its token now trades within a few percentage points of its 2017 price.
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MEMES AND MUMBLES
Yes, THAT Archie McPhee. The one that sells whoopie cushions and joy buzzers.
This edition of The Ledger was curated by David Z. Morris. Contact him at email@example.com
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