Why is the Block share price racing higher on Wednesday?

Block, which acquired Afterpay in January last year, is dual-listed in Australia and the United States.

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Key points

  • The Block share price is up 5%
  • Block shares closed up 6% on the NYSE overnight following a strong day for the tech heavy NASDAQ
  • Block’s CFO is making the case for less stringent regulations of the BNPL sector in Australia

The Block Inc (ASX: SQ2) share price is up almost 5% in early trading.

The leading buy now, pay later (BNPL) stock closed yesterday trading for $104.32 per share. Shares are currently changing hands for $109.40 apiece, up 4.9%.

Here's what's helping drive investor interest today.

Why is the Block share price soaring higher today?

The Block share price is flying higher today following a 2.1% leap yesterday (overnight Aussie time) on the Nasdaq Composite (INDEXNASDAQ: .IXIC).

Block, which acquired Afterpay in January last year, is dual-listed in Australia and the United States. And Block's shares soared 6% on the NYSE yesterday.

The big gains for tech stocks more broadly, and the Block share price specifically, come as investors are beginning to price in less aggressive rate hikes from the US Federal Reserve, and potentially other global central banks like the RBA.

This follows last week's collapse of SVB. With governments and investors now worried about the potential for other bank failures, the pressure will be on central bank bosses to ease off with rate hikes. That, as you know, would be good news for Afterpay and the wider BNPL sector.

Easy on the regulations

Block shares are also making headlines today as the company's CFO Amrita Ahuja wades into the regulatory debate.

The government is still considering three separate proposals when it comes to regulating the BNPL sector. The most stringent would see Block and other BNPL players subjected to the same regulations as credit card companies.

But as The Australian Financial Review reports, Ahuja said there are key differences between BNPL and credit.

"It is important to recognise this is a unique product: it is not a 30-year mortgage or a car or student loan," she said. "It is effectively working capital for many of our customers. The typical loan sizes are relatively small and typically pay off in a month or so."

Ahuja added:

We want to help bring regulators along on the journey in terms of the education on how this product is unique, and serving customer needs for cash flow management, and [determining] what are the appropriate protections given that.

Block share price snapshot

As you can see in the chart below, the Block share price has been a strong performer in 2023, up 18% since the closing bell on 30 December.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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