A 3D-printed Mastercard logo can be seen in front of the displayed stock chart in this illustration dated September 20, 2021.
Given Ruvic | Reuters
Mastercard is trying to bring crypto to the masses by making it easier for banks to get involved.
The payments giant plans to announce a program Monday that will help financial institutions offer cryptocurrency trading, the company told CNBC. MasterCard will act as a “bridge” between Paxos, a crypto trading platform already used by PayPal offer a similar service, and banks, the company said. Mastercard takes care of regulatory compliance and security – two main reasons banks cite avoiding the asset class.
Some consumers were also skeptical. Cryptocurrencies like Bitcoin are notorious for volatility, and the world’s best digital assets have lost more than half their value this year. The industry has suffered billions of dollars in hacks since January, coupled with several high-profile bankruptcies.
According to Mastercard’s chief digital officer, surveys still show demand for the asset, but about 60% of respondents said they’d rather test the waters at their existing banks.
“There are a lot of consumers out there who are really interested and intrigued by crypto, but would feel a lot more secure if these services were offered by their financial institutions,” Jorn Lambert, Mastercard’s chief digital officer, told CNBC in an interview . “It’s still a bit scary for some people.”
Big investment banks like Goldman Sachs, MorganStanley and JP Morgan have dedicated crypto teams but have largely avoided offering them to consumers. Just last week, JPMorgan CEO Jamie Dimon called cryptocurrencies “decentralized Ponzis” at an event hosted by the Institute for International Finance. If banks embrace this Mastercard partnership model, it may lead to more competition coin base and other exchanges operating in the United States
The payments company said its job is to keep banks on the right side of regulation by following crypto compliance rules, verifying transactions and offering anti-money laundering and identity surveillance services. Mastercard will trial the product in the first quarter of next year and then “pull the levers” to expand into more regions. Lambert declined to say which banks have signed up so far.
As the industry experiences a bear market, or “crypto winter,” Lambert said more activity in the future could lead to more transactions and boost Mastercard’s core business.
“It would be short-sighted to think that a little crypto winter heralds the end – we don’t see that,” he said. “As regulation is introduced, greater levels of security will be available to crypto platforms and we will see many of the current issues resolved in the coming quarters.”
Mastercard and Visa were both on crypto partnership. Mastercard has already partnered with Coinbase for NFTs and Bakkt to allow banks and merchants to offer crypto-related services on its network. Last week, Visas has 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 using its cards and network with stablecoins pegged to the price of a dollar or other fiat currency.
Ironically, cryptocurrencies should disrupt banks and intermediaries like Mastercard and Visa. Their underlying technology, blockchain, enables transactions without an intermediary. Still, Lambert said they’ve seen no industry opposition to their involvement. Crypto is on the “frontier of really going mainstream” and has yet to merge 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 industry as we know it,” Lambert said.