Card-based cryptocurrency transactions at the point of sale require conversion of the crypto assets to fiat currency for acceptance by the card networks. Now, the two top card networks are starting to change that. Mastercard Inc. early Tuesday said it will work with a pair of issuing banks and several service providers to test converting crypto coins to stablecoins for direct acceptance of crypto-backed cards on the network.
The pilot arrives as cryptocurrency for conventional consumer transactions is attracting increasing attention and as a number of projects have emerged to enable consumers to spend their crypto assets. It also 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, in this case, USD Coin (USDC), a currency linked to the dollar. The processor in the transaction was Crypto.com, a digital-currency trading platform.
Mastercard’s project could involve a bevy of service providers. The network says it is “in discussions” with two issuing banks, Evolve Bank & Trust and Metropolitan Commercial Bank. It is also talking to BitPay Inc. and Uphold Inc. to provide digital-wallet technology. Processing is expected to be provided by Apto Payments Inc., i2c Inc., and Galileo Financial Technologies. Two other firms, Circle Internet Financial Inc. and Paxos Technology Solutions LLC, will perform the conversions to stablecoins. Circle said earlier this month it intends to go public via a $4.5-billion deal with a special purpose acquisition company.
A date has not yet been set for the test to start. “We anticipate the pilot going live soon. Mastercard is working on a launch date with the partners mentioned in the announcement,” says a Mastercard spokesperson. She adds that more stablecoins could be added over time. “USDC is part of the pilot,” she says. “While the final choice of stablecoin is left to the issuer and the wallet provider, the stablecoin must conform to our foundational principles on stablecoin enablement.”
Tuesday’s announcement follows a release from Mastercard in February indicating the network intended to start later in the year processing cryptocurrency directly on its network. Experts at the time predicted stablecoins would be a logical starting point, since they avoid the notorious swings in value experienced by Bitcoin and other digital currencies not tied to any fiat currency.
Approximately 14% of U.S. adults own cryptocurrency, according to an estimate by cryptocurrency exchange Gemini. But the key to Mastercard’s venture in blockchain currency will be ease of use, not just for consumers but for merchants and other parties involved, executives at the company say. “Today, not all crypto companies have the foundational infrastructure to convert cryptocurrency to traditional fiat currency, and we’re making it easier,” said Raj Dhamodharan, executive vice president of digital asset and blockchain products and partnerships at Mastercard, in a statement.