Last Updated on February 14, 2021 by harsh vasistha
Mastercard is bringing cryptocurrencies to the checkout counter.
Mastercard said on Wednesday that it is planning to support “select cryptocurrencies” directly on its network at some point later this year.
If this happens, it will be a big deal for the whole cryptocurrency market, helping to further legitimize virtual currencies and dramatically expand the market scalability.
“Our philosophy on cryptocurrencies is straightforward: It’s about choice,” Raj Dhamodharan, an executive vice president at Mastercard, wrote in a post late Wednesday. “Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants, and businesses to move digital value — traditional or crypto — however, they want.”
Mastercard didn’t give many details on how customers will be able to use the allowed cryptocurrencies.
The company said it may work like this: When someone wants to buy an item with cryptocurrency, Mastercard’s crypto partners will convert the digital currency into traditional currency and then transmit them over Mastercard’s network.
This conversion “will allow many more merchants to accept crypto” as well as “cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases,” Mastercard said.
However, Mastercard says that it will only support cryptocurrencies that meet some requirements like stability, privacy, and compliance with money laundering laws.
We can hardly find a cryptocurrency that meets Mastercard’s criteria.
In fact, it’s not clear if any of them do.
Mastercard wants a cryptocurrency that is decentralized and regulated
Remembering that bitcoin, the first cryptocurrency, was designed to disrupt the power of governments and conventional financial institutions, we will know how hard it is for a cryptocurrency to be regulated.
The bitcoin network has a decentralized architecture that puts it beyond the reach of any government or regulator. Without government backing, bitcoin’s price is highly volatile.
Users have no support against funds lost to hacking or fraud. The bitcoin network doesn’t comply with anti-money laundering laws that conventional financial networks must follow—though some bitcoin intermediaries do.
In fact, a major reason that makes bitcoin so appealing to its supporters and followers is these points.
They believe that bitcoin’s lack of regulation and controller makes it a resourceful platform for innovation and a check on the power of governments.
But these same characteristics make the network a nightmare for financial institutions that do need to offer consumer protections and comply with money laundering laws.
What cryptocurrency meets the Mastercard criteria?
While not many cryptocurrencies comply with Mastercard’s requirements, few do, most notably USDC.
USDC is currently the second most popular dollar-based stablecoin after USDT. The company behind USDC, a US company called Circle, has signaled its commitment to regulatory compliance.
The USDC network is not fully open like a conventional cryptocurrency network. Rather, Circle will allow a limited number of financial institutions to issue USDC tokens, and these institutions in turn can grant customers access after verifying their identity. This enables the network to enforce anti-money-laundering laws.
That is what makes USDC the most promising cryptocurrency to be supported on the Mastercard network.
There may not be that many others that fit Mastercard’s criteria. Then, there comes a question, how many people want to make USDC-denominated payments over the Mastercard network.
If you want to send someone a dollar over the Mastercard network, you can just send a dollar. Or if you want to send someone a USDC token, you can do that natively on a blockchain network.
Still, the ubiquity of the Mastercard network may make this an appealing option for some people who don’t have access to specialized cryptocurrency exchanges. We’ll have to see what Mastercard does and how the market responds.