Mastercard to allow transactions in Cryptocurrencies?

Mastercard to Allow Crypto Transactions but Rules Out Most Cryptocurrencies

Wednesday, March 3rd, 2021, 10:20:19 AM

Mastercard has announced plans to allow merchants the option of receiving cryptocurrency payments later in the year.

In a first for the credit card giant, functionality that enables participating merchants to accept cryptocurrency payments directly from customers will be introduced. However, the company has yet to announce which digital currencies will be supported, or in which territories this option will be available.

Up until now, Mastercard allowed limited digital currency transactions via its crypto card associates Uphold and Wirex. These cards allowed for payments, but not settlements, to be made in crypto. All coins sent through these networks are converted to fiat before they reach the merchant.

Mastercard Logo on the plastic card

Håkan Dahlström from Malmö, SwedenCC BY 2.0, via Wikimedia Commons

This new programme will allow both crypto payments and settlements to be conducted over the Mastercard network.

But before you get all excited about the prospects of using your credit card to spend your crypto at your favourite online casino, there is a fly in the ointment. All digital currencies will have to meet the criteria laid out in Mastercard’s 2019 document “Principles for Blockchain Partnerships”.

This was published shortly after the company pulled out of Facebook’s Libra project and places emphasis on the need for regulatory compliance, stability and consumer protection. It also stipulates that the crypto must first and foremost be used as a method of payment rather than investment.

Will any cryptos qualify?

And therein lies the problem. Practically none of the 2000+ cryptos in existence today can meet all of these criteria. In fact most can’t meet any of these criteria. Bitcoin is definitely out, as are Ethereum, Ripple and all the other big names.

Some stablecoins might make the cut, although even this is doubtful. A stablecoin is a cryptocurrency that is backed by real-world assets. Tether, a crypto whose value is backed by the US dollar at a rate of 1:1 is currently the most used.

However, experts have long raised questions over whether the parent company Tether Inc. really has enough dollar reserves to back all the coin in circulation. These doubts are not eased by the company’s lack of transparency, which could also disqualify the currency from the Mastercard programme.

So why is Mastercard bothering?

Blockchain Illustration

Although it was only last year that Mastercard started actively supporting crypto payments, albeit in a very limited fashion, it has been quietly laying the groundwork to become a major player in the digital currency field for years.

Currently, it holds nearly 90 blockchain patents and another 285 pending around the world. These include ways to keep blockchain transactions private, instant payment processing, credit card payment verification on the blockchain and procedures for refunding crypto payments. It also hosts a platform on which central banks can test their digital currencies.

Obviously, the company is taking the long view with this move, rather than just jumping on the Bitcoin bandwagon. While none of the current cryptos might fit its rather stringent criteria, this looks extremely likely to change in the near future as governments and central banks around the world turn their attention to the blockchain.

Watch this space for future developments. Until then, better stick to the tried and trusted Neosurf vouchers for simple, hassle-free online payments.