Why is Mastercard bringing cryptocurrencies onto its network?
Cryptocurrencies are becoming a more and more important part of the payments world day by day. Mastercard also saw this playing out as they witnessed people using their cards to buy crypto assets as well as users taking advantage of crypto cards to access the digital assets and convert them to fiat currencies for spending.
With this in mind, Mastercard has announced that this year they will start supporting select cryptocurrencies directly on the network. This is a big change as it will require a lot of work. The announcement mentioned that they will be very thoughtful about which assets they support based on their principles for digital currencies, which focus on consumer protection and compliance.
The announcement on Mastercard’s website reads, “Our philosophy on cryptocurrencies is straightforward: It’s about choice. Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants, and businesses to move digital value – traditional or crypto – however they want. It should be your choice, it’s your money.”
This initiative will create a lot more possibilities for shoppers and merchants and allow them to transact in an entirely new form of payment. This change may open merchants up to new customers who are already flocking to digital assets, and help sellers build loyalty with existing customers who want this additional option. Customers will also be able to save, store and send money in new ways. Mastercard wants to help these concepts flourish and reach their potential, while also developing and encouraging the necessary guardrails.
However, not all of the cryptocurrencies in the market today will be supported on Mastercard’s network. While stablecoins are more regulated now than in the past, according to Mastercard, many of the digital assets in circulation still need to strengthen their compliance measures and hence, do not meet their requirements.
Mastercard elaborated on what they are looking for, saying, “First and foremost we need consumer protections, including privacy and security of consumers’ information — the same level of security people have come to expect in their credit cards. Next, strict compliance protocols will be needed, including Know Your Customer, a requirement meant to snuff out illegal activity and deception in payment networks. Also, these digital assets must follow local laws and regulations in the regions they are used. Lastly, people will want to use these digital assets for payments, so that is one of our criteria too. To reach our network, crypto assets will need to offer the stability people need in a vehicle for spending, not investment.”
Last year, Mastercard teamed up with BitPay and Wirex and created crypto cards that allowed their customers to transact using their cryptocurrencies. This year, they also joined forces with LVL, which is an up-and-coming cryptocurrency exchange.
However, in all of these cases, cryptocurrencies still don’t move through Mastercard’s network. Their crypto partners convert the digital assets on their end to traditional currencies and then transmit them through to the Mastercard network. This initiative towards supporting digital assets directly can allow many more merchants to accept crypto – an ability that is currently limited by proprietary methods unique to each digital asset. This change will also cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases.
With 89 blockchain patents granted globally and an additional 285 blockchain applications pending worldwide, Mastercard already has one of the payments industry’s biggest blockchain patent portfolios to draw from to make this project successful. Mastercard aims at using its experience in payments technologies and continuing these partnerships with governments in order to explore the best ways to develop these new currencies.