Mastercard to Help Banks Offer Cryptocurrency Trading

Mastercard aims to bring cryptocurrency to the masses, making it easier for banks to participate.

 

The payment giant plans to announce on Monday a program that will help financial institutions offer cryptocurrency trading, CNBC reported. Mastercard will act as a "bridge" between Paxos, a crypto trading platform already used PayPal to offer a similar service, and banks, according to the company. Mastercard will be concerned with regulatory compliance and security , the two main reasons why banks avoid the asset class.

 

Some consumers are also skeptical. Cryptocurrencies like bitcoin are notoriously volatile, and the best digital assets in the world have lost more than half of their value this year. Since January, the industry has been hit by billions of hacks combined with numerous high-profile bankruptcies.

 

Mastercard's chief digital officer said surveys still show demand for the asset, but roughly 60% of respondents said they would prefer to test water through their existing banks.

 

"There are a lot of consumers who are really interested in this and intrigued by cryptocurrencies, but they would feel much more confident if these services were offered by their financial institutions," Mastercard chief digital officer Jorn Lambert said in an interview. "Some people are still a little scared."

 

Major investment banks such as Goldman Sachs, Morgan Stanley, and JPMorgan have singled out crypto teams but have largely avoided offering it to consumers. Just last week, JPMorgan CEO Jamie Dimon called cryptocurrencies "decentralized Ponzi" at an institute of international finance event. If banks adopt this Mastercard partnership model, it could mean more competition for Coinbase and other U.S. exchanges.

 

The payment company said its role is to keep banks on the right side of regulation by following cryptographic compliance rules, verifying transactions and providing anti-money laundering and identity monitoring services. Mastercard will pilot the product in the first quarter of next year and then "crank the handle" to expand into more geographic regions. Lambert declined to say which banks have signed up so far.

 

While the industry is going through a bear market or "crypto winter," Lambert said more activity in the future could lead to more transactions and fuel Mastercard's core business.

 

"It would be short-sighted to think that a small crypto winter portends its end – we don't see that," he said. "As regulation of cryptocurrency platforms is introduced, the degree of their security will increase, and in the coming years we will see how many current problems will be solved in the coming years."

 

Mastercard and Visa enter into partnerships in the field of cryptocurrency. Mastercard has already teamed up with Coinbase on NFTs and Bakkt to allow banks and merchants on its network to offer cryptocurrency-related services. Last week, Visa partnered with FTX to offer cryptocurrency debit cards in 40 countries and has more than 70 cryptocurrency partnerships. American Express said it was exploring the possibility of using its cards and stablecoin network, which are pegged to the price of a dollar or other fiat currency.

 

Cryptocurrencies, ironically, were designed to destroy banks and intermediaries such as Mastercard and Visa. Their underlying technology, blockchain, allows transactions to be conducted without intermediaries. However, Lambert said they didn't see a response from the industry to their involvement. According to him, cryptocurrencies are on the "verge of a real mainstream", and for this they still need to unite with existing players.

 

"It's hard to believe that the crypto industry will really become mainstream without embracing the financial industry as we know it," Lambert said.