With digital assets and crypto-currencies gaining ground across the world, among individual investors and institutions, Mastercard will start supporting select crypto-currencies to enable their customers, merchants and businesses to use fiat or crypto currencies as per their choice, the card network giant said in a blogpost on Wednesday.
Last year, Mastercard partnered with crypto-exchanges Wirex and Bitpay to launch crypto-cards and will be partnering with another exchange, LVL, which will allow people to transact using their crypto-currencies. It also launched a Central Bank Digital Currency (CBDCs) testing platform for central banks to test and develop their digital currencies on top of Mastercard’s blockchain network. Mastercards’ main competitor, Visa Inc. also has entered crypto-currency race with its own set of crypto-cards and services for digital currencies.
“With 89 blockchain patents granted globally with an additional 285 blockchain applications pending worldwide, we already have one of the payments industry’s biggest blockchain patent portfolios to draw from to make these projects successful,” said Raj Dhamodharan, executive vice-president, digital asset and blockchain products and partnerships, Mastercard.
As part of Mastercards’ crypto strategy Dhamodharan says that then company will support crypto-currency payments directly on their network, which will provide customers and merchants different payment options and also open avenues for merchants to new customers who are actively using crypto-currencies. However, the card network
“In all of these cases, cryptocurrencies still don’t move through our network. Our crypto partners convert the digital assets on their end to traditional currencies, then transmit them through to the Mastercard network. Our change to supporting digital assets directly will allow many more merchants to accept crypto — an ability that’s 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,” said Dhamodharan.
However, not all crypto-currencies will be supported, many cryptos need to bettter compliance measures and therefore will not meet Mastercard’s requirements, he said.
“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.”
During an earnings call last month, Mastercard’s chief executive officer Michael Miebach said that the company will suport the development of CBDCs and crypto-currencies by creating rails that can run digital currencies and fiat currencies in parallel.
“Our level of support will vary based on regulations in a given market. We will continue to be guided by published principles on security, compliance and consumer protection and the value to our stakeholders in determining our involvement in a specific initiative. There is certainly a lot going on and significant opportunity ahead,” he said.
MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations. Read here: A complete low-down on crypto-currency regulation in India
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