Apple (AAPL), the maker of hot-selling items from iPhones to tablets, is the world’s largest publicly traded company, with a market capitalization of $2.3 trillion. 

So it almost seems natural that after the electric vehicle maker Tesla announced Monday a $1.5 billion purchase of bitcoin, at least one Wall Street analyst is running the math on whether Apple might benefit from jumping into the cryptocurrency fray. 

A new report from the brokerage firm RBC Capital Markets posits that Apple, which already provides payments wallets for millions of consumers in an economy that’s gone increasingly cashless since the coronavirus pandemic hit in early 2020, might be able to easily generate more than $40 billion from the cryptocurrency business. The company’s move could also help to make the U.S. a technological leader in cryptocurrencies for the next decade or two. 

The RBC analyst, Mitch Steves, figures that the payments firm Square (SQ) generates about $1.6 billion per quarter in bitcoin-related revenue on an active install base estimated at around 30 million. 

“Apple’s install base is 1.5 billion, and even if we assume only 200 million users would transact, this is 6.66x larger than Square,” according to the report. “Therefore, the potential revenue opportunity would be in excess of $40 billion a year (15% incremental top-line opportunity).”

According to the report, the research and development cost involved in the effort “would be de minimis in our view as Square’s entire R&D budget is under $1 billion.”

Competition in the crypto exchange space “is light,” the analysts wrote. Regulations make it difficult for U.S. consumers to purchase crypto, and many of the exchanges go down during times of high volume, they wrote.

Apple could solve the regulatory and know-your-customer (KYC) challenges of cryptocurrencies if it created a closed system in which it only transfers the ownership of crypto between customers, the analysts noted. 

It could also develop an open system that uses a bitcoin wallet and banking service Strike or the Bitcoin blockchain’s Lighting Network to reduce the cost of converting fiat to crypto, they added.

Apple standing up a crypto exchange could also reduce the likelihood the U.S. bans bitcoin in the future, the analysts said. 

“If Apple went down this path the U.S.A. would likely acquire the most crypto assets from a global perspective,” the analysts wrote. “If the U.S.A. owns the most crypto assets (be it bitcoin or other assets), it would not make logical sense in our view to ban it. In addition, with Apple’s secure and world-class software, the U.S.A. would be able to have confidence in user information and balances if needed in the future.”

Bitcoin on Apple’s balance sheet

There’s even a trick that Apple might pull to finance the project’s development: Bet money on bitcoin. 

The analysts proposed that Apple pay for the cost of developing an Apple crypto wallet or exchange (around $500 million, per their estimates) by adding bitcoin to the tech giant’s balance sheet.

“For example, if the firm purchased $5 billion of bitcoin (20-25 days of cash flow), the price of the underlying asset would need to rise by 10% for the firm to fully fund the entire project in the first place,” the analysts wrote. “This is a solid value proposition in our view as the business would be funded without diluting any other projects at the firm.”

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