Last summer, Starbucks announced an investment in a company called Bakkt, an open-source platform that enables the buying, selling, and spending of cryptocurrencies. That was pretty much the extent of the news — until now. This week, crypto publication The Block reported that Starbucks had secured “a sizable equity cut” in Bakkt and will be “heavily involved in developing the card and app that will allow it to serve as Bakkt’s first merchant-on-platform.” (Starbucks has no cash investment in Bakkt, and specific financials of the deal were not disclosed.)
But hang on to your Bitcoins, folks: the news doesn’t mean Starbucks will start directly taking crypto for lattes. Bakkt’s software is built to act as the middleman between merchant and cryptocurrency, which means Starbucks customers would have to download Bakkt’s software and use their digital currencies through that. Starbucks, in turn, would swap the cryptocurrency it receives for fiat, or currency the government deems legal but is not backed by a physical commodity. So crypto enthusiasts’ dreams of unseating capitalism will not be realized with this deal.
Taking the point of view of Starbucks, though, working with an intermediary makes sense. Cryptocurrency is a bearish market right now, with Bitcoin dropping 80 percent since its buying spree started in 2017. As we wrote last August, “the reality is that Bitcoin and others remain highly volatile in terms of price, which is one of the biggest reasons more retailers haven’t adopted them as forms of payment.” There are also numerous regulatory and financial risks involved with crypto, so not directly accepting it is simply safer. There is also the question of whether something like Bitcoin could even handle a percentage of the volume of Starbucks’ transactions in real time.
Still, it does put the coffee retailer at the forefront of a trend that, despite a bearish market, is going to generate more not less action in the coming years. As Starbucks told the Hard Fork: “We anticipate that a range of cryptocurrencies will gain traction with customers and, through our work with Bakkt, we will be uniquely positioned to constantly consider and offer customers new and unique ways to pay seamlessly, at Starbucks. As we continue to move forward with this work, we anticipate we’ll have more to share in the coming months.”
A handful of retailers out there currently take crypto. Overstock.com is basically a crypto company now. Shopify stores accepts it, as do NewEgg and Microsoft. The latter makes sense, as Microsoft powers the cloud infrastructure behind Bakkt.
We’re still a long ways off from digital currencies being part of the daily routine at the coffee shop, grocery store, or drive-thru. Starbucks’ involvement in the space is significant, but we’ll have to wait for more developments before we can legitmately get excited about the possibilities of crypto for lattes.