Jack Dorsey Scales Back Crypto Ambitions for Block

In the summer of 2021, amidst a surge in cryptocurrency popularity, Jack Dorsey, the co-founder of Twitter, revealed that his payment company, Square, would be launching a new division aimed at simplifying the creation of decentralized financial services.

Dorsey, a strong supporter of Bitcoin, declared on Twitter that the division, named TBD, would focus primarily on this cryptocurrency.

By December 2021, in a bold move, Dorsey changed Square Inc. to Block, a name he explained was related to multiple concepts, including blockchain, which underpins Bitcoin. Square’s crypto-focused branch was rebranded as Spiral.

Fast forward three years, and Dorsey is now pulling back on these initial dreams.

During Block's third-quarter earnings call recently, Chief Financial Officer Amrita Ahuja announced that the company was "winding down" its TBD division, which had been set up to develop a platform for open-source cryptocurrency.

Despite this shift, Block continues to have a significant amount of Bitcoin on its books—with its holdings now valued at approximately $630 million. The company plans to invest in a Bitcoin mining initiative and Bitkey, its Bitcoin wallet, and it will maintain the option for users to buy Bitcoin via its Cash App.

This represents a significant change in direction for Block.

The TBD division was initially envisioned as a creative platform for developers, under a project referred to as Web5, designed to promote a more decentralized internet. Dorsey had even stated in a 2022 tweet that Web5 could be Block’s most significant contribution to the internet.

However, the market sentiment around cryptocurrency took a turn for the worse as 2022 progressed. Rising inflation and interest rates led to growing pressure on companies to deliver faster returns for their investors. As a result, Block's shares plummeted more than 80% from their peak in 2021, reaching a low point in October of the same year.

Block acknowledged in late 2023 that it would downsize its workforce—nearly 1,000 jobs out of around 13,000—by the end of 2024. Reports indicated that layoffs had already occurred within the TBD division. Furthermore, Block mentioned in their third-quarter shareholder letter that they would also reduce their investment in Tidal, a music-streaming service acquired in 2021 for about $300 million, which was also tied to the TBD division.

When an analyst inquired about the company's strategy for Bitcoin during the call, Dorsey stated that their focus was on making the cryptocurrency more accessible to more people. He emphasized the importance of facilitating buying, selling, and peer-to-peer transactions of Bitcoin.

Dorsey stated his desire for the internet to have a native currency, which he believed would enable Block to conduct transactions more seamlessly and expand services in various markets.

A representative from Block reiterated the company's commitment to their previous statements and highlighted Dorsey’s comments from the earnings call.

It has become evident that Dorsey faces limitations in pursuing ambitious crypto projects amidst pressure from shareholders. Following the earnings announcement, Block's shares dipped about 1%, reflecting a miss in revenue expectations and weaker profit forecasts compared to analyst predictions.

In a detailed letter to shareholders, Dorsey focused entirely on the company’s lending services targeting small businesses. A notable portion of this is derived from Afterpay, a buy now, pay later service acquired by Block in 2021 for $29 billion.

Curiously, Dorsey made no references to crypto or Bitcoin in his lengthy communication.

Dorsey, Block, Crypto