As political headwinds lift the crypto industry, Mastercard is hoping to cash in on a bet it started years ago.
1️⃣ Creates multi-token network to work with banks like JPMorgan, Standard Chartered.
2️⃣ The main objectives are cross-border payments and tokenisation of deposits.
3️⃣ Wants to give 3.5 billion cardholders access to cryptocurrency.
4️⃣ Since 2015, it has filed 250 patents for blockchain technology.
The payments giant is looking to replicate its massive card network for the blockchain world to create a way for consumers, merchants and financial institutions to transact digital assets. This will require engineering work, regulatory support, key partnerships and getting buy-in from Wall Street. It will also position Mastercard as a critical provider of digital asset infrastructure for the growing industry, forming a competitive moat similar to what it has built in the payments space over the past 60 years.
"We're bringing the scale and reach that we have into the money movement space between the two worlds in a simple way," said Raj Dhamodharan, Mastercard's executive vice president of blockchain and digital assets, on traditional finance and decentralized finance.
"What's missing in that is a fully compliant framework and user experience offered across the chain, like how you do Venmo and Zelle today in the U.S. domestically," he added.
Bringing a Venmo-like attempt to move money and other assets through blockchain will not be easy, and the acceptance of financial institutions will be critical. As with any network, the value of the network increases as more users join. Mastercard, for its part, is seeking banks to join its crypto-focused network, the Multi-Token Network, to expand its functionality. So far, Mastercard has worked its way with JPMorgan and Standard Chartered to develop use cases such as cross-border payments and tokenization of deposits and carbon credits.
"Some of the players in the traditional financial world are interested in moving into this base because of the advantages technology offers and the new business models it can create," Dhamodharan said.
It's a fast-paced and dynamic time to be in crypto, Dhamodharan said. It's a change of pace from the retreat the industry saw in 2022, when several high-profile cryptocurrencies - such as the stunning collapse of trading platform FTX, the obliteration of algorithmic stablecoin terraUSD and the fall of overleveraged hedge fund Three Arrows Capital - threw cold water on the industry.
The tailwinds come from Washington, D.C., as the industry awaits more regulatory clarity. The lack of crypto regulation has largely prevented traditional financial institutions from fully embracing digital assets. Under the new administration, regulators including the Securities and Exchange Commission and the Office of the Comptroller of the Currency are paving the way for crypto players. Last week, incoming SEC Chairman Paul Atkins said at his Senate nomination hearing that providing a "firm regulatory foundation for digital assets through a rational, consistent and principled approach" is a top priority.