Fundamental step towards mass crypto adoption

    07 Dec 2021

    …was unexpectedly taken by Mastercard, which announced the integration of cryptocurrency payments. Mastercard partners, including merchants and banks, will be authorized to add support for digital assets to their products. The company customers will be able to buy, sell and store cryptocurrencies.

    The news, though long-awaited, still came as a surprise. Mastercard is getting ready to announce that all banks and merchants on its payment network will soon be able to integrate cryptocurrency into their products. It means allowing the client firms to open bitcoin wallets, credit and debit cards that accept cryptocurrency transfers. The payment system is ready to enable the use of digital assets, including as part of the loyalty programs, so that airline or hotel points can be converted into bitcoin or other crypto.

    The company said that financial institutions that issue Mastercard cards would also get the right to offer their customers cryptocurrency cards. Their holders will have the option to make payments and earn money in BTC.

    To facilitate all cryptocurrency transactions, Mastercard made a deal with crypto specialists in Bakkt Holdings. The partnership between Mastercard and Bakkt will let large banks offer crypto cards, increasing both the number of customers and their loyalty.

    Mind you, Bakkt is not some tiny startup that develops solutions at the intersection of crypto and fiat. In 2018, the company spun off the Intercontinental Exchange, the operator of the New York Stock Exchange (NYSE). In the fall of 2019, Bakkt Holdings unveiled its flagship product – deliverable bitcoin futures.

    This October, Bakkt also announced a long-term partnership with Google. Bakkt users will be able to add their virtual crypto cards to Google Pay and pay for goods and services with cryptocurrencies. As they make payments, cryptocurrency will be converted to fiat.

    Sherri Haymond, Executive Vice President for Digital Partnerships at Mastercard, commented on the company’s decision to enter the cryptocurrency payments market: “Thanks to our partnership with the Baktt platform, our partners, be they banks, fintech companies, or merchants, will be able to offer their customers the ability to buy, sell and store cryptocurrencies.”

    We still don’t know what specific cryptocurrencies the payment operator will open up to. On the one hand, many commentators have mentioned bitcoin; on the other, the company itself has repeatedly made it clear in statements and articles that it considers stablecoins the most acceptable option. We shall see.

    Undoubtedly, the decision will have large and far-reaching implications for the entire financial sector. Mastercard, along with Visa, works directly with over 20,000 financial institutions around the world. Those, in turn, provide businesses of all sizes with their financial services, including settlements through the Mastercard system. According to the payment operator itself, 2.8 billion people worldwide currently use its cards.

    All this being said, Mastercard can hardly be called a newcomer to the cryptocurrency industry. The company has been eyeing blockchain for a long time, albeit with a certain wariness. Its officials were also cautious in their comments and interviews.

    Then, in early September, Mastercard acquired the crypto analytical company CipherTrace. The payment operator explained that CipherTrace tools would be integrated into Mastercard’s own cybersecurity solutions related to cryptocurrency circulation. In addition, Masterсard had previously invested in the Ethereum ecosystem solution developer ConsenSys and made agreements with the Gemini bitcoin exchange and the Australian CoinJar platform.

    It all led to a qualitative leap – the transition to servicing direct cryptocurrency payments. The new Mastercard functionality seems to be initially available only in the United States. However, there is no doubt that soon (unless some catastrophic failures occur or a war with state regulators breaks out), the practice will spread to countries across the globe.

    The goal of Mastercard is clear: the company does not want to miss out on a vast and rapidly growing market. Back in July, both Visa and Mastercard affirmed their cooperation with the Binance cryptocurrency exchange, despite the strengthening of control by regulators.

    It is also laying the foundation for the future. A recent company poll showed that 77% of younger users are interested in cryptocurrency. Bakkt’s research is also quite revealing: 48% of respondents reported buying digital coins in the first half of 2021, with 32% of those who haven’t done so yet intending to acquire crypto by the end of the year.

    There is another crucial point. I mentioned the regulators for a reason. It is very possible that after some behind-the-scenes agreements, the American authorities deliberately allowed Mastercard to carry out cryptocurrency payments. Realizing that it is impossible to prevent the arrival of crypto payments, they may have decided to take control of them from the outset, entrusting a reliable and trusted payment service provider. Which, by the way, always gladly complies with authorities.

    As the old saying goes, “If you cannot fight them – lead them.”

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