When you think of financial services corporations that offer credit utilisation to their customer, few would forget about Mastercard, the New York giant that has been at the forefront of financial technologies since 1966. But even avid followers of the company would be surprised to see their latest fintech announcement – that they are bringing crypto onto their network.
This announcement was made in February by Raj Dhamodharan, Mastercard’s head of digital assets and blockchain products. With it came a whole host of questions – not least, how does this affect stable coins such as Bitcoin?
Bitcoin has been riding a wave of popularity of late, thanks to major corporations such as Tesla showing their interest in the cryptocurrency, purchasing $1.5bn. A steady increase over the previous six months has led to Bitcoin prices tipping $58,000 before stabilising around the $49,000 mark. They are the oldest and most-established of cryptocurrencies, having been in operation since 2008. So far, so good. Yet there is a considerable spanner in the works when it comes to adding Bitcoin to Mastercard’s arsenal – their crypto guidelines.
Mastercards Cryptocurrency Guidelines
Mastercard’s stance on cryptocurrency is one of caution. They understand that the financial industry is moving on. Consumers are seeking out a wider range of payment options, and are swayed by Bitcoin’s instant payment transfers and fee-free transactions. Major corporations such as Tesla, Microsoft and AT&T allow payments using the coin, and an estimated 36% of US small to medium businesses also allow their buyers to do so using Bitcoin. Yet, they understand that Bitcoin, along with many other cryptocurrencies bring new challenges in keeping their customers and their personal information safe.
Whether they like it or not, Mastercard needs to get involved in cryptocurrency to stay relevant. Mastercard has made it clear that they won’t support all cryptocurrencies on their network. They understand that customers want choice, but they also want to be sure that their money is safe. Cryptocurrency has always operated in an anonymous way, which brings its own concerns, not least, who out there is using the currency?
This is something that Mastercard is hoping to tackle with their ‘Know Your Customer’ guidelines, which require their customers to provide identification and complete an application form to sign up with Mastercard. They believe that this will eliminate the majority of illegal activity, something which has to be minimised for Mastercard to even consider a cryptocurrency for their network. Other guidelines will be brought in to protect a customer’s personal data and right to privacy, although how this is going to work with the ‘Know Your Customer’ guidelines is something that is up for debate.
The largest, and possibly the most difficult to implement, are Mastercard’s consumer protections, such as their chargebacks. These allow customers to claim back money if the goods or services purchased do not arrive or are not as expected. While this may seem easy in principle, add in a blockchain and the amount of time it would take to recall transactions on it, and you can see how mammoth a task it could be.
Bitcoin May Change
What this means for Bitcoin users, we’re not sure. Mastercard could decide that Bitcoin is too much of a risk to allow into their network. Although we doubt it, given its market share and its long-standing reputation. The more likely scenario is that Bitcoin transactions through Mastercard will follow a different process to the transactions we see currently. With it, the anonymity its users had will likely disappear, at least from Mastercard. But with new regulations should come new protections for the Bitcoin users, and that can only be a positive if it gets more people to use the cryptocurrency in the future.