The prospects for Mastercard payment solutions for cryptocurrencies

The total cryptocurrency market capitalization reached an all-time high in the last quarter of 2020. And in the first months of 2021, the development and growth of cryptocurrencies wasn’t less explosive. Bitcoin has recently risen above $50,000, and the Ethereum price has more than doubled since the beginning of 2021. Thus, cryptocurrencies again moved from the fringes of financial life, where they were after the fall, back to the center of finance. Investors are engaged again, and therefore the topic of decentralization of the monetary system is again a hot-button issue.

Tens of thousands of people invest in digital currencies, and the prospect of using them as a form of payment for goods and services is getting closer. Many companies have implemented a digital currency payment method in Europe, the USA and Latin America. Among the world’s largest companies, these are some of the leaders in the fast food industry Subway and KFC, the Expedia booking service, the e-commerce company Shopify, Starbucks and others. Bitcoin’s recent all-time high was boosted by the $1.5 billion purchase of bitcoins by American electric-automobile manufacturer Tesla and the company’s announcement of plans to accept bitcoin as a payment method for car sales.

Mastercard MPS has joined the group of companies that support and promote changes in banking and developing financial technologies in cryptocurrency.

Why Mastercard implements cryptocurrency payment solutions

The digital assets are becoming an increasingly important part of the payments world. Mastercard sees how this trend plays out on the payment system network and affects the use of cards to buy crypto assets and convert them into traditional currencies. Mastercard announced that this year it will start supporting select (not all) cryptocurrencies directly on its own network. The choice of cryptocurrencies will be based on the principles for digital currencies, which focus on the consumer protections and legal compliance.

Mastercard’s philosophy on cryptocurrencies is straightforward — it’s about choice. The payment system doesn’t aim to recommend starting to use cryptocurrencies, but works to provide customers, merchants and enterprises with the opportunity to choose and use legal digital opportunities productively and to the full extent. And it doesn’t matter if these are traditional financial transactions or crypto-related.

This change will add a completely new payment method which may open merchants up to new customers, and customers will be able to manage funds in new ways.

The key points for Mastercard in the cryptocurrencies operations are:

● The same level of security and protection of consumers’ information as with credit cards;

● Strict compliance protocols such as KYC to snuff out illegal activity in payment networks;

● The digital assets must follow the relevant local laws and regulations;

● The use of cryptocurrencies for payments.

Mastercard teamed up with Wirex and BitPay last year, and this year with the LVL cryptocurrency exchange to implement the plans for cryptocurrencies integration into its network, as well as for crypto card issuance. Although the digital assets are now converted into traditional currencies on the end of the crypto partners as previously (cryptocurrencies still don’t move through the Mastercard network ), the payment system will start supporting digital assets directly in 2021.

Also, the payment system is actively engaging with several major central banks on the launch of central bank digital currencies (CBDCs) as a new payment method for citizens. However, the barrier here is the legislation of the countries, many of which prevent or simply don’t regulate the issuance of the Central Bank digital currency.

A grain of salt

Despite the steady growth of cryptocurrency owners and supporters, a large number of people and companies still look at today’s trends in the cryptocurrency market with a grain of salt. Why? There are several reasons for this. Of course, the high volatility of cryptocurrencies. The issue of legalisation of cryptocurrencies by the governments and the introduction of field regulation is also relevant, because the crypto transfers can be declared illegal or taxed at any time. Furthermore, the cryptocurrency market is quite low-liquid — in November 2020, about 2% of the anonymous accounts control 95% of all bitcoins. The digital currencies are very young and not time-proved like gold, for example. This creates opportunities, but stability is still more important for the majority.

CEO of the international payment system LEO, the shareholder of IBOX Bank