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The two big card networks are making preparations for big moves into cryptocurrency payments. But crypto is no stranger to fraud, so Mastercard Inc. on Thursday announced it is acquiring CipherTrace Inc., a 6-year-old company specializing in technology to combat money laundering and other crimes involving digital-currency transactions.
The deal, terms of which were not disclosed, comes as Mastercard readies a pilot to test converting crypto coins to stablecoins for direct acceptance of crypto-backed cards on its network. Mastercard’s pilot follows a similar move by Visa Inc., which late in March said its integration with San Francisco-based Anchorage Hold LLC, the first federally chartered digital-asset bank, allowed the network to process its first transaction involving direct settlement with a stablecoin, which is a digital currency linked to the dollar.
Mastercard now expects its CipherTrace acquisition will help monitor and interpret moves in the crypto market that could indicate transaction risk. The unit will also help support regulatory compliance.
The problem of crypto-related fraud has grown in recent years. “U.S. exchanges as a whole received $8.4 million worth of bitcoin directly from criminal addresses and sent $41.2 million worth of bitcoin directly to criminally associated addresses,” CipherTrace says in a report on activity in 2020.
“With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe,” said Ajay Bhalla, president of cyber & intelligence at Mastercard, in a statement. “Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”
Based in Menlo Park, Calif., CipherTrace offers fraud-protection, anti-money laundering, and investigatory services connected to blockchain transactions. Clients include banks, crypto exchanges, regulators, and law-enforcement agencies.
The company’s founder, Dave Jevans, is a former Apple Inc. executive and widely recognized expert in payments fraud. He has served as chairman of the Anti-Phishing Working Group, a widely recognized organization specializing in financial-crime intelligence, since 2003. “Our two companies share this vision to provide security and trust throughout the ecosystem,” Jevans said in a statement, referring to his company’s agreement to be acquired by Mastercard.
