To be completely clear, not all of today’s cryptocurrencies will be supported on our network. While stablecoins are more regulated and reliable than in the recent past, many of the hundreds of digital assets in circulation still need to tighten their compliance measures, so they won’t meet our requirements. We expect consumers and the ecosystem as a whole will start to rally around the crypto assets that offer reliability and security. It’s those very same stablecoins that we expect to bring into our network.
What are we looking for? Four key items.
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First and foremost we need consumer protections, including privacy and security of consumers’ information — the same level of security people have come to expect in their credit cards. Next, strict compliance protocols will be needed, including Know Your Customer, a requirement meant to snuff out illegal activity and deception in payment networks. Also, these digital assets must follow local laws and regulations in the regions they are used.
Lastly, people will want to use these digital assets for payments, so that is one of our criteria too. To reach our network, crypto assets will need to offer the stability people need in a vehicle for spending, not investment.
We are already working hard to provide this consumer choice for cryptocurrencies. We teamed up with Wirex and BitPay last year to create crypto cards that allow people to transact using their cryptocurrencies. We added to those partnerships this year by joining forces with LVL, an up-and-coming cryptocurrency exchange. These relationships — with many more planned in the pipeline — build on our many years of crypto collaborations.
In all of these cases, cryptocurrencies still don’t move through our network. Our crypto partners convert the digital assets on their end to traditional currencies, then transmit them through to the Mastercard network. Our change to supporting digital assets directly will allow many more merchants to accept crypto — an ability that’s currently limited by proprietary methods unique to each digital asset. This change will also cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases.
Added to this work, Mastercard is actively engaging with several major central banks around the world, as they review plans to launch new digital currencies, dubbed CBDCs, to offer their citizens a new way to pay. Last year, we created a test platform for these banks to use these currencies in a simulated environment. Using our deep experience in payments technologies, we look forward to continuing these partnerships with governments and helping them explore the best ways to develop these new currencies.
With 89 blockchain patents granted globally with an additional 285 blockchain applications pending worldwide, we already have one of the payments industry’s biggest blockchain patent portfolios to draw from to make these projects successful.
We are inspired by so much of the work going on in the payments world — in banking, in emergent fintechs, in crypto — to push forward change. And we are doing as much as we can to set the stage for these players to take the next step forward.