Mastercard helps banks offer cryptocurrency trading

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Mastercard wants to bring cryptocurrency to the masses by making it easier for banks to participate.

According to CNBC, the payments giant plans to announce a program Monday that will assist financial institutions in offering cryptocurrency trading. Mastercard will serve as a “bridge” between PayPal and Paxos, a cryptocurrency trading platform.

According to the company, to provide a similar service, and banks Mastercard and Paxos will handle regulatory compliance and security, which are two of the main reasons banks avoid the asset class.

Some customers were also skeptical. Bitcoin and other cryptocurrencies are notorious for their volatility, with the world’s top digital assets losing more than half of their value this year. Since January, the industry has been hacked for billions of dollars, coupled with multiple high-profile bankruptcies.

According to Mastercard’s chief digital officer, there is still demand for the asset, but roughly 60% of respondents said they would rather test the waters with their existing banks.

“There are a lot of consumers out there who are really interested in this, and intrigued by crypto, but would feel a lot more confident if those services were offered by their financial institutions,” said Jorn Lambert, Mastercard’s chief digital officer, in an interview with CNBC. “It’s still a little frightening for some people.”

Although large investment banks such as Goldman Sachs, Morgan Stanley, and JPMorgan have dedicated crypto teams, they have largely avoided offering it to consumers. JPMorgan CEO Jamie Dimon recently referred to cryptocurrencies as “decentralized Ponzi schemes” at an Institute for International Finance event. If banks do decide to embrace this Mastercard partnership model, it may mean more competition for crypto firms like Coinbase and other exchanges operating in the U.S.

According to the payments company, its role is to keep banks in compliance with regulations by following crypto compliance rules, verifying transactions, and providing anti-money-laundering and identity monitoring services. Mastercard will pilot the product in the first quarter of next year before “cranking the handle” and expanding into new markets. Lambert would not reveal which banks have signed up so far.

Why mastercard is acting now

While the industry is experiencing a bear market or “crypto winter,” Lambert believes that increased activity in the future could lead to more transactions and fuel Mastercard’s core business.

“It would be naïve to believe that a little bit of a crypto winter heralds the end of it; we don’t see that,” he said. “As regulation is implemented, there will be a higher level of security available to crypto platforms, and we’ll see a lot of the current issues resolved in the quarters to come.”

Both Mastercard and Visa have been on a crypto partnership binge. Mastercard has already collaborated with Coinbase on NFTs and Bakkt to enable banks and merchants in its network to provide cryptocurrency-related services. Visa partnered with FTX last week to offer crypto debit cards in 40 countries, and it now has over 70 crypto partnerships. American Express has stated that it is looking into using stablecoins with its cards and network, which are pegged to the price of a dollar or another fiat currency.

Coincidentally, cryptocurrencies were designed to disrupt banks and middlemen such as Mastercard and Visa. Their underlying technology, blockchain, enables transactions to take place without the use of intermediaries. Nonetheless, Lambert stated that they have received no industry backlash for their involvement. According to him, cryptocurrency is on the “cusp of really going mainstream,” but it still needs to collaborate with the incumbent players to get there.

“It’s difficult to imagine the crypto industry going mainstream without embracing the financial industry as we know it,” Lambert said.

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