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Bitcoin backers cheering Amazon should be wary of Tesla-style disappointment

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·Senior City Correspondent, Yahoo Finance UK
·3 min read
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Photo by: Dennis Van TIne/STAR MAX/IPx 2021 7/25/21 Van Jones receives $100 Million from Jeff Bezos after Bezos returns from space. STAR MAX File Photo: 12/14/17 Jeff Bezos at the premiere of 'The Post' in Washington DC.
A 'Bezos buck' could be as likely as adoption of bitcoin at Amazon. Photo: Van TIne/STAR MAX/IPx/AP

Once again the crypto crowd have something to cheer about: speculation that Amazon (AMZN) is poised to accept digital money.

The tech giant has posted a job opening for a "Digital Currency and Blockchain Product Lead" based in its Payment Acceptance & Experience Team. The successful candidate will “innovate on behalf of customers within the payments and financial systems of one of the largest e-commerce companies in the world". 

The price of bitcoin (BTC-USD) and other cryptocurrencies surged on the back of the posting. Some reports suggested Amazon could be accepting bitcoin in just a few months.

Read more: Bitcoin and other cryptocurrencies surge on Amazon payments rumours

Bitcoin investors shouldn't get carried away just yet. We’ve been here before. 

Tesla (TLSA) suggested it would accept bitcoin as payment for its electric vehicles earlier this year before boss Elon Musk backtracked. The saga spiked, then sunk, the price of bitcoin. Any punter who bought into bitcoin after Tesla’s initial statements is now sitting on some steep double digit percentage losses.

Amazon may well end up accepting bitcoin but there are plenty of reasons why it may choose a different path. Bitcoin presents headaches around regulation. Know your customer rules require Amazon to audit who owns each token and anti-money laundering rules mean it must check that each bitcoin isn't ill-gotten. Pricing your products in a currency that often jumps around wildly hour-to-hour is also a challenge.

Read more: Bank of England official: We could be reaching money's 'iPhone moment'

Bulls will argue that bitcoin’s volatility is declining and point to companies popping up to solve regulatory issues like these.

Still, Amazon might well decide to simply pinch the underlying technology and build its own, less troublesome version of bitcoin. That's what Facebook (FB) decided to do with Diem, formerly Libra. 

The EU and the UK are already talking about building their own digital currencies — why not the 'Bezos Buck' too? The benefits to Amazon would be obvious: lock cash into your ecosystem to encourage people to spend more and more on the site. As interest rates start to rise, a huge pile of customer cash locked up in interest-baring accounts wouldn't be so bad either.

In a statement, Amazon said it was "inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon." That certainly leaves the door open to a number of possibilities.

Read more: Could ethereum overtake bitcoin?

If Amazon did launch its own digital currency, it might not be positive for the price of bitcoin. Sure, it would validate the technology and the concept. But it would also present competition. Amazon fans could well decide to park their wealth in Bezos Bucks rather than bitcoin.

As ever with bitcoin, the 'buyer beware' principle is important. Investors should be wary of the potentially downsides as well as the potentially upsides. At the moment, it seems like most of the market just focuses on the later.

Watch: What are the risks of investing in cryptocurrency?