Mastercard wants to bring crypto to the masses by making it easier for banks to get involved.
The payment giant plans to announce a program on Monday that will help financial institutions offer cryptocurrency trading, the company told the reporter. Mastercard, according to the company, will act as a “bridge” between Paxos, a crypto trading platform already used by PayPal to offer a similar service, and banks. Mastercard and Paxos will handle regulatory and security compliance — two key reasons banks cite for avoiding the asset class, CNBC reports.
Some consumers were also skeptical. Cryptocurrencies like bitcoin are known for their volatility and the world’s best digital assets have lost more than half of their value this year. The industry has suffered billions from hacks since January, coupled with multiple high-profile bankruptcies.
Mastercard’s chief digital officer said polls still show demand for the asset, but about 60% of respondents said they’d rather test the waters through their existing banks.
“There are a lot of consumers who are really interested in this, and intrigued by crypto, but would feel a lot more confident if those services were offered by their financial institutions,” Jorn Lambert, Mastercard’s chief digital officer, told the reporter in an interview. “It’s still a little scary for some people.”
Major investment banks such as Goldman Sachs, Morgan Stanley and JPMorgan have dedicated crypto teams but have largely avoided them to consumers. Last week, JPMorgan CEO Jamie Dimon called cryptocurrencies “decentralized Ponzis” at an Institute for International Finance event. If banks embrace this Mastercard partnership model, it could mean more competition for Coinbase and other exchanges operating in the US
The payment company said its role is to keep banks on the right side of regulation by following crypto compliance rules, verifying transactions and providing anti-money laundering and identity verification services. Mastercard will test the product in the first quarter of next year and then “turn the lever” to expand into more geographic areas. Lambert declined to say which banks have signed up so far.
As the industry goes through a bear market or “crypto winter,” Lambert said more activity could lead to more transactions later and fuel Mastercard’s core businesses.
“It would be short-sighted to think that a bit of a crypto winter is heralding the end of it – we don’t see that,” he said. “As the regulations roll in, there will be a higher degree of security available to the crypto platforms and we will see many of the current issues being resolved in the coming quarters.”
Mastercard and Visa have both had a partnership in crypto. Mastercard has already partnered with Coinbase on NFTs and Bakkt to allow banks and traders in its network to offer crypto-related services. Last week, Visa partnered with FTX to offer crypto debit cards in 40 countries and has more than 70 crypto partnerships. American Express has said it is exploring its cards and network with stablecoins, which are pegged to the price of a dollar or other fiat currency.
Cryptocurrencies ironically were intended to disrupt banks and intermediaries such as Mastercard and Visa. Their underlying technology, blockchain, allows transactions without intermediaries. Still, Lambert said they haven’t pushed the industry back on their involvement yet. Crypto is on the cusp of really going mainstream and still needs to work with the established players to get there, he said.
“It’s hard to believe that the crypto industry will truly go mainstream without embracing the financial sector as we know it,” Lambert said.
