How Apple’s App Store Fee Affects NFTs
Good morning, and welcome to Protocol Fintech. This Wednesday: App Store Tax Expands to NFTs, Meta Pay Wins, and Bill Harris Explains Elon Musk’s X Obsession.
Off the chain
I’m old enough to remember when Amazon, courting online-wary customers in the ’90s, let them call an 800 number and read their credit card numbers to an operator. It has been an innovator in payments ever since, going all the way back to its purchase of Accept.com, the operation that eventually became Amazon Pay. If there’s one thing that’s held it back in payouts over the decades, it’s a failure to play well with others.
So I think it’s a big deal that PayPal and Amazon just made a deal for Amazon to accept Venmo. The most likely customers here are Venmo sellers who want to use their balances right away instead of waiting to sweep the money into their bank accounts. But it also looks to me like a foothold for future deal-making: The real payoff is when PayPal’s self-titled service is accepted at Amazon, opening up Amazon’s customer base for its pay-as-you-go products. It’s a deal that would have been unthinkable when eBay, once Amazon’s arch-nemesis, owned PayPal. But times have changed, and Amazon is also showing signs of change.
– Owen Thomas (e-mail | twitter)
A tax too far?
Apple released new rules for the App Store this week, which could have major implications for NFTs and crypto payment companies. The rules confirm that the App Store’s fees on digital goods will also apply to NFTs. People are already wary of Apple’s fees — it’s the same reason Epic Games sued Apple, my colleague Nick Statt points out — but the idea of applying the App Store tax to crypto products has really pissed some people off.
Apple welcomes NFTs, which is huge for the industry. But reading the fine print is crucial. Beyond the fees, Apple has made other rule changes that affect tokens.
- Apple made it clear for the first time that apps can create, list and transfer NFTs within their apps. And apps can sell NFTs in their apps. This is positive for the NFT market.
- However, purchasing the NFTs must go through the App Store, which has a number of implications. This means that payments must be made in fiat since the App Store does not accept crypto. The rules explicitly prohibit buttons, links, or other means by which customers can purchase outside of the App Store.
- It appears to rule out other ways for consumers to purchase crypto and NFTs on crypto apps through crypto payment providers such as Wyre, Transak or MoonPay.
The real effect could be to steer crypto app developers away from iOS. Since they are so new, it is unclear whether the rules will limit their interest.
- One scenario: While NFTs may become more common on iOS apps, some developers may choose to keep them in browsers. Or they can simply limit their iOS apps to avoid the App Store’s fees, which run as much as 30% on transactions. OpenSea, the largest NFT marketplace, does not allow in-app purchases on its iOS app.
- Additionally, the new Apple rules prohibit the use of NFTs to “unlock features or functionality within the app.” This type of token-gated content or commerce has become an area of interest for a number of companies in e-commerce, gaming and online communities.
- Shopify recently launched a token-gated commerce effort, which Alex Danco, head of blockchain at Shopify, told me this summer would bring new forms of loyalty and new experiences for consumers. It has worked on NFT projects such as Doodles and Cool Cats. Shopify declined to comment on Apple’s new NFT rules.
- Other apps and games that use NFTs to access parts of the app or game also appear to be affected. For example, Stepn and YDY are sweat monetization apps where consumers connect to an NFT to earn tokens for exercising. The content of the app relies on a connected NFT, which Apple can see as a token-gate setup. Stepn declined to comment. YDY CEO Jason Baptiste said Apple’s recognition of NFTs was “a big step,” but there are unanswered questions that won’t be resolved “until we start seeing new App Store reviews using these rules.”
Apple has opened a can of worms. It’s not the first time Apple has tried to expand its definition of what constitutes digital goods for which it charges App Store fees. In 2020, Apple asked Eventbrite to pay the 30% fee when classes went online due to COVID-19. Meta, which launched an online events service at the same time, criticized Apple for charging the fee, saying it hurt event organizers at a time when they were already suffering. Apple’s policies for online events and ticketing could clash with the new NFT rules, as companies like Ticketmaster either plan to or already use NFTs as tickets for physical events. Apple does not charge fees for real-world tickets. But what if the NFT is a digital good that unlocks the physical ticket? It is exactly the blurring of the lines between the real world and the digital that NFTs promise, and Apple’s attempt to draw sharp distinctions may stumble here.
– Tomio Geron (e-mail | twitter)
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On the money
A16z takes a big hit from its crypto games. The firm’s flagship crypto fund shed about 40% of its value in the first half of this year, reports The Wall Street Journal.
Fundbox has cut 40% of its staff. The fintech lender to small businesses laid off about 140 employees at its US and Israel offices.
FTX is collecting money. CEO Sam Bankman-Fried confirmed at The Wall Street Journal’s Tech Live conference that it is in talks with investors, and may use the funds to expand its reach among crypto traders.
About protocol: Caroline Butler, managing director of BNY Mellon’s custody services, explains why it’s getting into crypto.
Meta Pay is now available through JPMorgan Chase. JP Morgan Payments merchants can add Meta Pay – the former Facebook Pay – to their websites as a payment option.
A record number of Americans have bank accounts. About 4.5% of Americans — roughly 5.9 million households — were unbanked in 2021, the lowest level since the FDIC began tracking the data in 2009.
Senator Elizabeth Warren wants to know why former regulators keep joining crypto firms. Warren and a group of other progressive lawmakers wrote to several agencies asking how to stop the “revolving door” between crypto and government.
Matt Levine has 40,000 words to say about crypto. Bloomberg Businessweek dedicated its entire latest print edition to the financial writer’s article, “The Crypto Story.”
Companies are citing the Fifth Circuit’s ruling to challenge the CFPB enforcement. The court’s ruling that the CFPB’s funding structure is unconstitutional is already an enforcement headache for the agency.
Overheard
Kim Seo-joon, managing director i Hasheda VC firm that invested in Terraform Labs and suffered heavy losses due to the failure of the luna cryptocurrency, was reportedly a no-show at a hearing by the Korean National Assembly’s political committee on the debacle. “After the luna-terra incident I was under extreme stress and my health was deteriorating and I needed to stabilize,” he said in a statement.
Just one more question… Bill Harris, CEO, Nirvana Money
Harris has just launched Nirvana Money, a fintech that aims to unify fragmented financial services into a single, easy-to-use account. Before that, he was the first CEO of PayPal and founded Personal Capital and several other fintechs. He was also CEO of Intuit.
Why might Elon Musk think of creating a super app with Twitter called X?
First of all, I have no idea. The only thing I can comment on is the letter X has been a fascination for Elon for as long as I have known him. In fact, the original name was X.com when Elon and I teamed up to start PayPal. It was Elon’s: He had bought that domain. It was [one of] the only one-letter domain[s] in the world because the domain name administrator made the decision quite early on that there would be no single letter domains on the .com TLD. But somehow the X slipped out, he got it, and because it was special, that’s what we used. And I think that was the origin of his fascination with the letter X.
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![Avalanche [AVAX] double down on the NFT industry, here’s how](https://www.cryptoproductivity.org/wp-content/uploads/2023/01/1669897105632-b12c71dc-570c-4668-8875-79f4b64bf2e7-1-1000x600-520x245.png "Avalanche [AVAX] double down on the NFT industry, here’s how")
