Starbucks Stablecoins

I ignore almost all of the meaningless shilling masquerading as “news” that arrives via my cryptocurrency feeds, but a recent story about Bitcoin in the mass market caught my attention because it appeared to herald an unexpected and significant shift in the mass-market use of the digital gold. The announcement was that Starbucks is “working with Microsoft and a leading global exchange on a new digital platform that will allow consumers to use bitcoin and other cryptocurrencies at Starbucks”. Wow. That’s a pretty big deal. LiteCoin for latte would indeed be hugely significant. But…

That headline about Starbucks taking Bitcoin struck me as a little odd, since I distinctly remember that Howard Schultz, the executive chairman of Starbucks, said back in January that “I don’t believe that bitcoin is going to be a currency today or in the future”. Indeed when I looked at the actual story I realised that it was, as you probably suspected, not true. And, what’s more, just a couple of days later I read that “Starbucks has clarified that it will not be accepting Bitcoin (BTC) or other cryptocurrencies as payment”. As I suspected.

Reading further into the announcements we get down to the the brass tacks. Starbucks has no intention of accepting Bitcoin at retail point of sales (and nor, I imagine, does any other Main Street retailer). Starbucks said that they will play a “pivotal role” is developing applications “for consumers to convert their digital assets into US dollars”. Note the specifics: to convert cryptocurrencies into US dollars. What was actually being announced was, essentially, a plan to find a way of loading Starbucks wallets from Bitcoin accounts.

In other words, the conversion from Bitcoin into Starbucks private currency. Bitcoin to Starbucks Stablecoin, if you like, since Starbucks guarantees to redeem their private dollars at par with US dollars, so long as your redeeming them in order to buy coffee or a variety of other soft drinks, bottled waters and snacks.

Now, earlier in the year Jeremy Light, who knows what he is talking about, made the evolution of retailer wallets central to his predictions for change in the payment sector this year. He said that these wallets – for both online and in-store purchases, where I expect to see convergence – will spread “emulating the success of Starbucks and Walmart” by focusing on slick checkout. I think Jeremy is right about this and that’s what makes the Starbuck announcement mildly interesting, because a convenient mechanism to load retailer wallets from cryptocurrency accounts would actually make the use of them more attractive.

There is no point try to extend Bitcoin acceptance at point-of-sale. That’s not what is was designed for and it makes no sense from a strategic perspective for retailers to mess around with in-store systems, service and acceptance to accommodate Bitcoin, Ethereum, DogeCoin or anything else. However, having online mechanisms to load the retailer wallets is a different proposition, because the point-of-sale systems only need to be modified once (to accept the wallet) and the any number of back-end conversions can be explored without requiring further front-end modifications. That’s a win-win for the retailers and for the cryptocurrency users.

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