Mastercard has announced that it will begin supporting select cryptocurrencies directly on its payment network this year. Mastercard made the announcement in February, touting that the change would create “more possibilities for shoppers and merchants,” enabling them to move digital value – traditional or crypto – in a new form of payment.
Unlike Mastercard’s previous endeavors in the blockchain space, such as its partnerships with Wirex and BitPay to offer cryptocurrency debit cards, this change would support digital assets on Mastercard’s network directly. In previous projects, cryptocurrencies did not move through the Mastercard network. Instead, Mastercard’s cryptocurrency partners would convert the digital assets on their end to traditional currencies, then transmit them through the Mastercard network.
Mastercard announced that its native support will allow many more merchants to accept cryptocurrency, and remove inefficiencies from the process, letting consumers and merchants avoid having to convert back and forth between cryptocurrency and traditional currency to make purchases. This would enable merchants to directly settle in the supported cryptocurrencies.
However, some of the most popular cryptocurrencies today, such as Bitcoin and Dogecoin, will likely not be supported. In its announcement, Mastercard laid out four criteria it would use to evaluate cryptocurrencies for potential integration and suggested that only stablecoins – those pegged to traditional currency to avoid large price fluctuations – would be eligible. Mastercard’s four criteria include:
- robust consumer protections, including privacy and security of consumers’ information
- strict compliance protocols, including Know Your Customer (KYC)
- operation in full compliance with all applicable laws and regulations in the regions where the transactions take place
- payment functionality, including stability needed for spending – not as an investment
Mastercard also announced that it is actively engaging with “several major central banks” as they review plans to launch new central bank digital currencies (CBDCs). Last Year, Mastercard created a testing platform for central banks to assess and explore CBDCs in a simulated environment, and Mastercard indicated it is looking to continue these partnerships.
Mastercard is not alone in these efforts. Visa also recently announced plans to work with cryptocurrency wallet providers and exchanges to enable Visa cardholders to purchase cryptocurrencies, such as Bitcoin, with their Visa credentials and to cash out into fiat currency to make purchases at any of the 70 million merchants where Visa is accepted. In addition, Visa announced in March it is piloting a suite of crypto application programming interfaces (APIs) to allow banks to access cryptocurrency features and integrate them into their product offerings.
2021 is gearing up to be a breakout year for the development and adoption of blockchain payments technology. Venable will be keeping a close eye on these developments; stay tuned to this blog for updates.