The Western Union Company (NYSE:WU) has had a rough year, dropping sharply at the end of January ahead of the general market slump, and still only trading slightly ahead of its year-end levels after a rally back in June. But BTIG analyst Mark Palmer argues that the disruptive threat posed by Bitcoin may be receding, opening the door for Western Union stocks to appreciate.

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Bitcoin down sharply following DFS regs and a CFPB warning

People’s views on Bitcoin can be broken down into two basic groups: those who see it as a new form of currency, and those who see it as a new form of payment. When Global Payments Inc (NYSE:GPN) announced that it would work with BitPay to process Bitcoin payments for its clients, it was really taking the second position. Merchants would still be able to set their prices and receive payments in hard currency, while BitPay would take on the volatility risk.

These sort of arrangements, as Palmer recognizes, are a serious threat to any payment processing and money transfer company that isn’t willing to change with the times. But the magnitude of that threat could be overstated.

Warnings from the Consumer Financial Protection Bureau (CFPB) and new regulations from the New York Department of Financial Services (DFS) requiring many companies to obtain a BitLicense seem to have Bitcoin speculators, those who see it as a new currency or asset, spooked and Bitcoin has lost about 20% of its value in the last week after months of relative stability. It’s also at just over a third of its $1,200 high.

Western Union has absorbed regulatory costs, says Palmer

The Western Union Company (NYSE:WU) on the other hand has been dealing with new, costly compliance requirements that are pushing smaller companies and some banks out of the money transfer business. But nearly a year into its transition to deal with new CFPB rules, Western Union is coming out the other side.

“So while Bitcoin’s issues with new regulations are still before it, WU is getting closer to the point at which it will have fully absorbed its increased regulatory burden,” Palmer writes. “We believe the company is poised to return to a healthy level of earnings growth in 2015 and that it will be in position to add significantly to the $500mm in capital return that it is poised to deliver on this year.”