Apple Should Create Crypto Exchange and Buy Bitcoin, Says RBC

Apple Inc. should follow in Tesla Inc.s footsteps, but by getting into cryptocurrencies, not electric vehicles, according to RBC Capital Markets.

The iPhone maker could create a sizable new market for growth if it were to develop its Apple Wallet into a crypto exchange, said analyst Mitch Steves.

“The wallet initiative appears to be a clear multi-billion dollar opportunity for the firm (potential for well over $40 billion in annual revenue with limited R&D),” Steves wrote in a note to clients.

Companies like Square Inc. and PayPal Holdings Inc., along with closely held exchanges like Coinbase, have all validated the exchange model as a real business, he said, and Apple would immediately gain market share if it were to enter the industry. In addition, Apples ecosystem would offer improved security relative to the companies that would be its competitors.

Apple shares, up about 70% in the past year, closed up about 0.1% in Mondays session. PayPal has climbed nearly 40% since it announced it would allow customers to buy, hold and sell cryptocurrencies directly from their PayPal accounts.

RBC's comments come at a time when companies have been showing more interest in Bitcoin and other cryptocurrencies. Notably, Tesla invested $1.5 billion in Bitcoin and indicated its interest in accepting the cryptocurrency as a form of payment Monday. That helped send Bitcoin prices up as much as 16%, cresting $44,000 and hitting a record. Tesla rose 1.3% on Monday.

While Apple's biggest cryptocurrency opportunity would be in building an exchange, it could also consider adding Bitcoin or another digital currency to its balance sheet, RBC wrote. “This would send even more users to Apple Exchange,” Steves said, and would likely further boost Bitcoin prices.

Earlier on Monday, Hyundai Motor Co. and Kia Motors Corp. said they werent in talks with Apple to develop an autonomous vehicle. While analysts have been optimistic about the prospect of Apple entering the automotive industry in some fashion, RBC was less effusive, writing that such a move was a higher-risk proposition than crypto.