Block, formerly known as Square, announced on Thursday that its Cash App business generated $50 million in Bitcoin gross profit in the first quarter of 2023, up 16% Y-O-Y. The total sale amount of Bitcoin sold to customers was $2.16 billion, up 25% year-over-year. The increase in Bitcoin revenue and gross profit was driven by an increase in the quantity of Bitcoin sold to customers, despite a decrease in the market price of Bitcoin compared to the prior-year period.
Block’s shares (SQ) last traded at $60.43 on Thursday, up 1.87% over the day, jumping almost 5% to $63.35 compared to Friday’s pre-market trades.
Cash App is a popular tool for buying and selling Bitcoin, especially for younger users and those who prefer to conduct financial transactions on their mobile devices. The mobile payment service allows users to link their bank accounts, credit cards, or debit cards to their account and use the app to send or receive payments from other users.
The app also offers a range of other features, including the ability to invest in stocks and a debit card that allows users to spend their Cash App balance at retailers and withdraw cash from ATMs. In October 2022, Block announced full support for Lightning Network, Bitcoin’s second layer scalability solution that enables users to conduct fast and low-cost transactions off-chain, while still enjoying the security and trustlessness of the network.
Block revealed it did not post an impairment loss on its Bitcoin holdings in Q1 after investing a total of $220 million in the leading cryptocurrency in the fourth quarter of 2020 and first quarter of 2021. As of March 31, 2023, the fair value of the company’s investment in Bitcoin was $229 million, or “$126 million greater than the carrying value of the investment after cumulative impairment charges.”
“The accounting rules for Bitcoin currently require us to recognize any decreases in market price below carrying value as an impairment charge, with no upward revisions recognized when the market price increases until the sale of that Bitcoin,” said the company.
The US Securities and Exchange Commission (SEC) has delayed defining the term “digital assets” in rules governing reporting disclosures for hedge and private equity funds. The agency originally proposed including the term in amendments to Form PF in August 2022, but now says it is still considering the definition. The SEC’s proposed definition was an asset “that is issued and/or transferred using distributed ledger or blockchain technology”.
Block’s success in the Bitcoin market and its investment in the cryptocurrency has caught the attention of investors. Despite the SEC’s hesitancy to define digital assets, the regulator has announced plans to revisit its definition of an “exchange” to include decentralized finance. As the crypto market continues to evolve, it remains to be seen how regulators will adapt to the changing landscape.
