The two big card networks have made no bones about their interest in supporting cryptocurrency transactions, and this week both made big moves in that direction. The bigger move came from Mastercard Inc., which on Wednesday announced its intention to launch later this year the ability to send and receive crypto transactions natively on the company’s network.
Then, on Friday, Visa Inc. made a more modest announcement welcoming a blockchain startup called GreenBox POS into its Fintech Fast Track program. The move gives San Diego-based GreenBox access to the massive VisaNet backbone network for a cobranded Visa card for push-to-card payments.
Mastercard’s decision means it will process digital-currency transactions directly on its network, a major departure from current practice where it has processed fiat transactions for operators that have already converted their crypto assets. The new system will require “a lot of work” to build, says Raj Dhamodharan, executive vice president for digital asset and blockchain products and partnerships, in a blog post.
“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,” Dhamodharan says in the post. “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.”
The technical work on the new rail has already started, a Mastercard spokesman tells Digital Transactions News. When ready, it will move “a Mastercard transaction, like a card transaction, it would just be a cryptocurrency,” he adds.
But just as some digital currencies are riskier and more volatile than others, the new platform will not support all cryptocurrencies. “Not all crypto will automatically come on board,” the spokesman says, adding he can’t at the moment “project” which ones will be supported at the start. Many digital currencies are hobbled by spotty or non-existent observance of know-your-customer and anti-money-laundering laws, which would rule them out for consideration. “[M]any of the hundreds of digital assets in circulation still need to tighten their compliance measures, so they won’t meet our requirements,” says Dhamodharan’s post.
The cryptocurrency community will be watching Mastercard’s initiative closely. BitPay Inc., an Atlanta-based company that processes crypto transactions for merchants, applauded the card company’s decision. “Kudos to Mastercard for wanting to support cryptocurrency. This announcement shows they are deepening their intentions and from a merchant network standpoint, they know this is part of a long-term strategy for them,” says Bill Zielke, chief marketing officer at the company.
Observers since the Wednesday announcement have speculated that so-called stablecoins and central bank digital currencies might be a logical starting point. Both can be linked to a national fiat currency to avoid the wild swings in value that characterize Bitcoin and many other cryptocurrencies.
But Diem, a stablecoin backed by Facebook Inc. and other companies, has struggled to overcome skepticism from national governments. Originally called Libra, the project launched in 2019 with support from Mastercard, Visa Inc., and other major payments players, but these and many other backers pulled out within months after the project drew withering criticism from central bank authorities in the United States and Europe.
It might be different this time. Mastercard has been working with central banks around the world, Dhamodharan’s post says, and last year created a test bed for them to experiment with their currencies. “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,” the post says.