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From Tweets To Payments

Categories : Cash is universal, Cash protects privacy and anonymity
November 10, 2022
Tags : Cash substitution, Digital payments, Privacy and anonymity, Twitter
Nine months after the collapse of the Facebook-led Diem stablecoin, Twitter contemplates joining the monetary space race. Could Twitter evolve into a payment or banking platform?
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

Ever since Elon Musk acquired the social media for $44 billion on October 27, the debate has been raging on Twitter and traditional media. Musk has introduced a frenzy of controversial changes, including laying off half the workforce, delisting the company, thereby making it less subject to scrutiny, charging the coveted verification check-mark of user-profiles $8 per month, as well as plans to boost revenue by allowing users to send direct messages celebrities by paying a fee or adding videos via a pay-wall.

From Payments to Banking to the Everything App

The New York Times reported that the company had filed registration paperwork to pave the way for it to process payments, according to a filing with the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN. During a publicly broadcast meeting on Twitter Spaces, Musk also floated the idea of adding banking to Twitter, though it was still very early. He said Twitter could be the site of “an extremely compelling money market account,” where users could attach an authenticated bank account to their handle, move money into Twitter and even use debit cards tied to the site.

Musk, whose Twitter handle now reads ‘Twitter Complaint Hotline Operator’, is no newcomer to payments. In 1999, he helped found, an online bank which later became PayPal. His tweets have played a significant role in driving different cryptocurrency prices up and down. In February 2021, Musk announced that Tesla had bought $1.5 billion worth of Bitcoin. In March, he announced that Tesla would accept Bitcoin for payment. In April, Bitcoin reached its all-time high of $64,863.10. Later in May, he reversed his decision to accept Bitcoin for environmental reasons. The price of bitcoin has been declining since ($16,700 at the time of writing).

Tech Crunch provides a three-stage scenario of how Twitter payments could scale. First, users with a cash balance on the platform – e.g. users who have paid for their verified blue tick – would be prompted to move that money on Twitter. Small donations could incentivize them.

Second, users could move their money out of Twitter by transferring it to an authenticated bank account.

Third, says Tech Crunch, ‘In the longer term, however, Musk appeared to be toying with establishing bank accounts on Twitter’s platform that would pay a high-interest rate to attract users. This could become a competitor to Apple’s recently launched Savings Account for its cardholders, fintech or other payment providers, like PayPal and Venmo, which encourage users to retain cash balances within their ecosystems.”

The move to enter the payments and banking markets supports Musk’s larger plan to turn the social media platform into an “everything app” or “super app” called “X.” combining payments with social networking, shopping and more into a single experience, similar to China’s WeChat or Alibaba, before the Chinese regulators’ crackdown on the tech giants.

Twitter Thrives on Controversy. Money is Based on Trust

Any move into banking will subject Twitter to regulatory scrutiny. Facebook has learned this the hard way. In February 2022, Facebook ended its controversial ambitions in digital money and payments and sold the assets of the Diem Association, following a two-and-a-half-year battle with regulators and central banks across the globe.

The Washington Post reported last week that Musk struck confidential agreements with investors that entitled them to personal information rights in the company if they poured $250 million or more into the bid. That threshold would appear to qualify investors, including a Saudi prince’s holding company, a subsidiary of Qatar’s sovereign wealth fund and crypto exchange Binance — founded in China — for information rights in the company.

US President Joe Biden was asked at a news conference whether Musk was a threat to national security and if the US government should investigate his acquisition of Twitter with help from a Saudi Arabian conglomerate. “I think that Elon Musk’s cooperation and/or technical relationships with other countries is worthy of being looked at,” Biden said. “Whether he is doing anything inappropriate, I’m not suggesting that. I’m suggesting they’re worth being looked at.”

It is far too early to anticipate whether Musk’s bold plans in the payments and banking space will materialize or succeed. After all, Musk recently tweeted, ‘Please note that Twitter will do lots of dumb things in coming months.’ However, no one should underestimate the capacity to disrupt and distort the existing market. More than ever, the initiative illustrates that the future monetary landscape must be fair, resilient, sustainable and respectful of civil liberties. To this end, a functioning monetary system necessarily includes cash.

This post is also available in: Spanish