Fintech

Square’s still a payments company. Will crypto hardware change that?

Plans for a hardware wallet are a step toward CEO Jack Dorsey's ambitions to popularize bitcoin.

Jack Dorsey at Bitcoin Miami

Jack Dorsey said Square might develop crypto wallet hardware. Now the company's plans are confirmed.

Photo: Joe Raedle/Getty Images

Square is leaping into building a crypto hardware wallet, seeking to grab a leading role in the crypto industry.

Jesse Dorogusker, Square's head of hardware, announced it on Twitter this week, saying Square wants to "make bitcoin custody more mainstream."

CEO Jack Dorsey had previously said Square was considering a hardware wallet.

Square is better known for its payments products for merchants and its Cash App, but is moving ever-deeper into the crypto business. Crypto-related business was almost 70% of its revenue in the first quarter.

But that figure is more a quirk of accounting rules than a reflection of where the weight of Square's business lies. Square's Cash App, which lets users buy and sell bitcoin, is known for introducing newbies to cryptocurrency rather than appealing to hardcore crypto users. That's where a hardware wallet comes in.

Hardware wallets provide extra security, since online crypto accounts can be hacked through SIM swaps and social engineering. Hardware wallets, which can be kept offline, enable people to secure their crypto private keys rather than letting crypto exchanges hold them. While a number of companies provide "cold storage" custody services for larger crypto holders in secure, vault-like environments, hardware wallets are used more by individuals with large sums of crypto to secure.

Square's current crypto customers don't seem like the natural target for a hardware wallet. Many of its customers initially use Cash App, its peer-to-peer payments product, and then later try other services such as crypto, the company has said.

But that may be the point. Crypto is top-of-mind for Dorsey. If he wants Square to be known as a leader in crypto, building a hardware wallet for hardcore enthusiasts is one way to do that.

"Whatever I can do, whatever my companies can do to make Bitcoin accessible to everyone is how I'm going to spend the rest of my life. If I were not at Square or Twitter, I'd be working on bitcoin," Dorsey said at a recent conference in Miami.

The question is whether Dorsey's personal ambitions can shift the market's realities.

"My personal point of view is that a hardware wallet solves the wrong set of priority issues for consumers in terms of enabling greater usage of crypto," said Tom Loverro, general partner at IVP, an investor in Coinbase. "I think the more important issues at this point are nailing the consumer usability for utilizing crypto in digitally and crypto native experiences."

Square, which is creating a small team led by Max Guise to build it, apparently wants to make hardware wallets more user-friendly. And hardware is one of Square's specialties, going back to its original payment dongle. Dorogusker, who joined Square nearly a decade ago after eight years at Apple, oversees hardware design.

Square's challenge is to appeal to enthusiasts who want a hardware wallet while making it mainstream.

Dorogusker said Square would seek to offer "assisted-self-custody," which suggests some role for Square's online services, while focusing on mobile use.

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