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PayPal launches crypto trading on Venmo

PayPal will now allows users to buy, sell and hold cryptocurrency through its Venmo app. Yahoo Finance’s Myles Udland, Julie Hyman and Brian Sozzi share the details.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Tuesday morning. It's Doge Day, 4/20 here in the US. Of course, all eyes on the crypto space-- I don't really know if that's true. It's kind of a joke. But anyway, more crypto news this morning, as there tends to be. Let's talk about what's happening over at PayPal-owned Venmo. Venmo announcing this morning that they're going to allow its users to buy and sell cryptocurrencies for-- they can spend as little as $1 on those currencies. They can buy it right there in their Venmo account.

I just checked mine-- currently not able to do that, though I presume this functionality will be rolled out throughout the day today. Maybe I need an app update. Maybe I haven't gotten that auto update from the App Store quite yet. But broader adoption of, I think-- the way I think about it is nickel and diming your way into crypto. And we kind of see this with Square Cash as well. Square has been the real innovator here.

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You know, the one Bitcoin right now is 60 grand, basically, let's call it, to use round numbers. That's not for everybody. And we're talking a lot about stocks. Do they need to have a stock split? Amazon is a couple of thousand bucks per share. But a lot of the retail adoption of crypto has been the empowerment of people to buy these smaller chunks really easily. Again, Square Cash kind of the canonical example here.

I'm not sure how much of a-- how much impact this is going to have or Venmo or certainly for the cryptocurrencies that have more than enough buzz. But Venmo sees something in how Square Cash has deepened its engagement with its customers and felt the need to get even more integrated in this space. Obviously, a parent company has had their own ambitions there, but I suppose the logical follow-on now for Venmo users.

JULIE HYMAN: Yes, and I think what this situation sort of brings up for me is that for a very long time, before the last six months, say, the thinking, it seemed to me, among many cryptocurrency holders was that payments would then add-- lead to broader adoption of Bitcoin and other currencies as an investment. And instead, it has happened in the opposite way. In other words, people are holding it as an investment. And that is now leading to more actual currency as a payment transaction ability.

And I think Venmo is kind of an example of this, that, yes, you can buy these currencies. But presumably, the goal is to then be able to pay with them. We see that with Tesla as well, of course, accepting Bitcoin as payment for its vehicles. So it's sort of backwards to perhaps what some of the early goals for Bitcoin were.

I don't know what that means ultimately for adoption. But I know that you get the crypto folks cheering every time we see another company that makes a move like this. It's all sort of incremental towards their goal of getting this stuff to replace existing currencies, which we still seem very, very, very, very far away from.

BRIAN SOZZI: Yeah, I'll be a little bit of a wet blanket here for investors. I mean, Venmo has about, what, over 70 million users. So I think as an investor, you need to be careful of extrapolating that all 70 million of those users are now suddenly going to be trading back and forth using cryptocurrencies. And Paypal's going to earn a cut in their earnings. And it'll go up $5 over the next year and a half, two years. That's not how it works.

But I will note this, too. Last week, PayPal's CEO Dan Schulman noted the crypto service for PayPal will reach $200 million in volume in a matter of months or maybe less. So this is starting to accrue and become a real business, I think, for investors to start modeling in to Paypal's forward earnings. But again, to what I just said on Venmo, you have to be careful in extrapolating too much from-- as in all 70 million users are going to start using crypto.

MYLES UDLAND: Well, and you know, Sozzi, I think seeing Paypal's stock not do much today implies that that is sort of the analyst case right now. But Julie, you make an interesting point on crypto in general that I think maybe bears reiterating, which is that for a long time-- and crypto advocates would say this was wrongly seen to be the bull case for crypto-- but for a long time, there was this notion that cryptocurrencies were going to or needed to have the same utility as a US dollar would have and that that was the end state for the space, though the real maturity in the last year, at least as far as I see it, is around the investability of crypto.

It is a suitable investment now or is deemed a suitable investment now by more people in larger size at a wider variety of institutions. And that has really bolstered the case for cryptocurrencies. And thinking about that in the context of Venmo, which is going to have or which does have a younger user base that is pretty much using this to split the bill, pay some rent-- my wife used to pay for her half of the apartment. She'd Venmo me, and that was kind of sitting there like it's funny money. That is the Venmo core user.

But if they're now seeing this less as-- I mean, certainly it's a payment platform for them, but also a part of an investable portfolio, then crypto doesn't need to worry about challenging the dollar, right, or challenging the euro. The dollar can still be the primary way that we buy goods and services. But the real solidity of crypto, I guess, as part of the financial ecosystem is now as an investment, as a diversifier, rather than as something that's going to have the same kind of utility.

And we see the news this morning that WeWork is going to start allowing its tenants to pay in cryptocurrency. A lot going on there, not the least of which is that WeWork back in the news again. Coinbase says it's going to pay WeWork for some of its office space in crypto. But I'm not so sure that that news needs to be one of a new flood of companies using crypto to meet dollar denominated obligations. I think just having crypto as a part of the portfolio and WeWork is going to hold it on its balance sheet as an investment, that would seem to be right now the primary driver of both theses.

JULIE HYMAN: Well, and to sort of come back to the original point, too, as to what the original goal of this step was, I think when people just started pouring money into some of these cryptocurrencies at various points where we have seen the increases, and we are not used to thinking of an investment as divorced from utility. There aren't really many investments out there that aren't used for anything else, that are purely a store of value. I mean, you could argue that maybe with gold, but even gold, you do stuff with. You make stuff out of it.

And so, when you look at something like Dogecoin, for example-- maybe that's the purest example among the coins because it was a joke when it was created. And but it is an interesting thought exercise that they're-- I don't know of anything else where you just buy it as an investment, and it doesn't do anything else, right? Is there anything else like that?

MYLES UDLAND: Well, I mean, as I was thinking about it-- and we kind of got to go so I won't get all into this.

JULIE HYMAN: Sorry.

MYLES UDLAND: You could argue--

JULIE HYMAN: We're really rambling here.

MYLES UDLAND: No, no, I was going to say-- no, no, I think it's an interesting conversation. But I know the critics are losing their mind behind the scenes. I think you could argue you can have a discussion around whether an equity security doesn't sort of fit the bill. And, like, the do something with it would be you could collect the dividend, depending on the security, or you could borrow against the value of that security, either to fund your retirement or to buy property, so on and so forth. I think crypto is likely going to-- certainly probably can do it now-- fulfill the latter, you know, condition, I guess, right? So, in that situation, then it becomes just as valuable as other investments. But we'll table this for another time. Exciting times as always in the crypto space.