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Around 100 million people own an iPhone or iPad, and the fast-growing mobile payments industry is estimated to be worth $90 billion within three years. So when Apple blocks every app that enables Bitcoin transactions, that's a big blow for the cryptocurrency.
Today Apple removed the Bitcoin transaction app Blockchain from its app store, the only Bitcoin-related app that hadn't already been given the boot. The notoriously tight-lipped company didn't elaborate on why it removed the app beyond citing "unresolved issues." But it's looking more and more likely that Apple's giving Bitcoin the cold shoulder because it's gearing up to launch its own digital payment system, and sees virtual currencies as unwelcome competition.
Apple's run on Bitcoin-related apps is a bold move, even given the company's monopolistic bent and history of blocking competitor apps. Isn’t Apple supposed to worship at the altar of innovation and out-of-the-box thinking? You’d think it would be patting Bitcoiners on the back for yet another industry disrupted. Thing is, that particular industry, mobile payments, is one that Apple stands to make a killing on. At the end of the day, Apple's a business—and a big one.
Apple’s uniquely positioned to cash in on mobile payment technology, with some 600 million user credit cards on file, versus PayPal's 110 million active accounts and Bitcoin's still small and niche user base. The hardware giant has been laying the groundwork for its nascent payments business for years, waiting for the right time to make a move. Now might be that time.
Last month the Wall Street Journal reported that Apple top brass was talking to retail and commerce execs about launching a wide-reaching payments system. A lot of the pieces are already in place. You can currently buy music, movies, apps in the iTunes store with your saved credit card info, and some small items in physical Apple stores by swiping your phone. Now, with its in-store shopping app iBeacon, Apple's gearing up to expand beyond its own walled ecosystem and into brick-and-mortar stores, which still make up 85 percent of commercial purchases.
"Apple is absolutely the sleeping giant in the payments world," Forrester Research analyst Denee Carrington told the Journal. "They have the capability; they just haven't tied it all together."
So is Apple snubbing Bitcoin as a defensive strategy? Blockchain CEO Nicholas Cary said it's clear Apple plans to take on mobile payments and that its actions are anti-competitive. But Cary also pointed out that Apple's technology just makes traditional payments more convenient; it’s still subject to transaction fees, which presumably Apple could take a cut of. "This isn't innovative at all," he told me.
And this is where cryptocurrencies could pose a threat. "Bitcoin won't dent their mobile payments revenue. It will completely circumvent it," Cary said. "Bitcoin is a completely frictionless payment protocol. Instant, irreversible transactions, nearly for free and no risk of fraud or identity theft."
Bitcoin poses a more specific threat because, as its own independent, nonpolitical currency, the third-party legacy players (i.e., VISA, Mastercard, banks) can be bypassed which would disrupt Apple’s partnerships with dongle players like Square and iZettle. Bitcoin payment apps have already demonstrated the effectiveness of QR codes and scanning at the point of sale which is obviously Apple’s bridge strategy prior to full Near Field Communication (NFC) deployment.
The lack of transaction fees give virtual currencies a leg up, and could be one reason Apple blocked Bitcoin apps but not other digital payment apps, like Google Wallet, Square, Stripe, Amazon One-Click, and PayPal. PayPal, for its part, is in an interesting position in all this. Now that the word’s out that Apple is talking to industry execs, the e-commerce company is shaking in its boots. It pitched Apple last week to partner up on the in-store payments plan, but Apple's shown no sign it wants to make this a team effort. Meanwhile, PayPal is hedging on whether to embrace Bitcoin or try to stop the crypto-trend from rendering the service irrelevant.
The other possible reason Apple's targeting virtual currency is that it’s simply easier to prevent a new spate of cryptocurrency apps than kick out longstanding services that consumers are accustomed to and enjoy. Without Apple's support, virtual currency will have a much harder time breaking out of crypto-nerd circles and entering the mainstream economy. The rumblings in those circles this week suggest that if Apple doesn't warm to Bitcoin and altcoins, the community will flock to Android. Google would be waiting with open arms.