Mastercard today introduces Crypto SourceTM, a new program to enable financial institutions to bring secure crypto trading capabilities and services to their customers.
The 2022 Mastercard New Payments Index reported that 29% of respondents globally hold cryptocurrency as an investment, with another 65% indicating a preference for crypto-related services to be provided by their current trusted financial institution.*
In partnership with regulated and licensed crypto custody providers, Mastercard’s financial institution partners will gain access to a comprehensive suite of buy, hold and sell services for select crypto assets, augmented with proven identity, cyber, security and advisory services. This Crypto Source offering is complemented by Mastercard Crypto SecureTM to bring additional security to the crypto ecosystem and support card issuers in their compliance with complex regulations.
Now, Mastercard’s suite of crypto-related offerings for banks and fintechs includes:
- Technology and partnership support to enable buy, hold and sell of select crypto assets
- Security management including Mastercard’s identity solutions, crypto analytics, transaction monitoring, anti-money laundering, ‘Know Your Business’ and lifecycle stages, cybersecurity, and biometrics
- Crypto spend and cash out capabilities offered through a range of products, including crypto cards, open banking and cross border services. Financial institutions would also be able to offer additional functionality using Mastercard’s technology such as digital receipts and loyalty solutions
- Crypto program management including program design, product development and technology implementation, as well as go-to-market optimization and marketing consultancy services, providing end-to-end support for banks, fintechs and issuers to offer crypto programs at scale
“At Mastercard, trust is our business. What we are announcing today is a connected approach to services that will help bring users safely and securely into the crypto ecosystem. Our recent investments in this space, such as the acquisition of CipherTrace and Ekata, are providing us with a unique set of capabilities to help provide our customers and consumers with the most technically advanced solutions available in the market,” said Ajay Bhalla, President, Cyber & Intelligence at Mastercard.
To support this program, Mastercard is expanding its partnership and work with Paxos Trust Company, a leading regulated blockchain infrastructure platform. The partnership aims for Paxos to provide crypto-asset trading and custody services on behalf of the banks, while Mastercard will leverage its technology to integrate those capabilities into banks’ interfaces, resulting in a seamless experience for the consumer.
“Our commitment is simple – to explore crypto and the underlying digital assets technology to support consumer choice in payments. Today is an exciting step in our crypto journey that draws on the strengths of our global businesses, from open banking and identity verification to analytics and fraud monitoring to settlement solutions. We’re excited to build on our long-term partnership with Paxos – co-innovating to bring safe and secure technology to financial institutions. Our crypto product innovations will provide choice at scale and continue to bring one-of-a-kind opportunities to financial institutions as they seek to offer new, advanced services to their customers,” said Jorn Lambert, Chief Digital Officer at Mastercard.
“Mastercard has a powerful network of financial institutions around the world. This exciting offering developed by Paxos and Mastercard will give FIs the fastest and most trusted way to offer safe, reliable crypto access for their consumers globally. We’re thrilled to partner with Mastercard to further accelerate the mainstream adoption of digital assets,” said Walter Hessert, Head of Strategy at Paxos.
Over the past few years, Mastercard has been working alongside its customers and partners to bring new services and capabilities that help make crypto more accessible, safe and secure. These efforts have been complemented with the addition of new technologies through Finicity, Ekata, RiskRecon and CipherTrace. This unique combination of services provides eligible financial institutions the opportunity to directly manage crypto asset investments for consumers. Mastercard also continues to support banks, governments and others through its Crypto & Digital Currencies Consulting Services.
Mastercard Crypto Source is currently being prepared for pilot programs. Additional details on broader availability will be made available at a later date.
Mastercard’s new service will allow banks to offer crypto trading services without having to actually complete the transactions themselves. The most important part of this relationship for the banks is that it will allow them to outsource the compliance and record keeping for the crypto side of the business.
This is an area that is rife with regulatory challenges and one that large, risk averse financial institutions are keen to avoid.
In practice the program could work by having individuals make a trade through their bank’s app or platform, which is then routed through Mastercard and completed via Paxos. How this is implemented will differ between banks, with some likely to offer consolidated functionality through their existing apps and others keeping crypto separate from their customers main financial holdings.
For banks it allows them to widen their service offerings which can help attract and retain customers. The more products and services a customer has with a single financial institution, the less likely they are to move somewhere else.
As you’d expect, Mastercard and Paxos will pick up a commission for providing the service, although full details of this have not been released.
So far Mastercard haven’t released the names of the banks who have signed up for the program, but they have stated that it will begin with a pilot program in Q1 2023. The expectation is that after this point, the offering will be rolled out nationally and potentially globally.
Crypto has continued to become more mainstream, but in many ways it still involves a leap of faith.
Despite spending billions of dollars in advertising that has included celebrities like Matt Damon and Kim Kardashian, naming rights for the stadiums of the LA Lakers, Miami Heat, LA Chargers and LA Rams, Super Bowl commercials and countless other deals, the companies at the forefront haven’t yet built up the same level of trust as the mainstream financial system.
After all, they’re up against banks like Wells Fargo which was founded in 1852, JPMorgan which goes back to 1871 and Goldman Sachs from 1869.
That’s a lot of history to make up for.
A deal with the likes of Mastercard will allow banks like these to offer crypto trading services to customers who would be unlikely to consider investing otherwise. Customers trust these financial institutions and would therefore be more likely to hand over their hard earned cash, on the expectation that they won’t be fleeced by an outright scam.
With that said, there’s not going to be any hiding from the volatility that crypto can experience. The sector is in the midst of a crypto winter, with prices falling dramatically after a significant bull run throughout the pandemic years.
So far this year Bitcoin is down over 50%, Ethereum is down almost 60% and many other digital currencies have fared even worse.
Bitcoin was the first real crypto currency and it was created on the basis of being able to conduct transactions without the need for a trusted third party. Up until then, sending money or assets to anybody else required a middle man to verify the transaction.
If you wanted to send money to a friend, you would instruct your bank, who would then check you had sufficient funds to then send to your friends bank, who would then confirm that the account existed and then deposit the money.
In many cases, particularly in the developed world, there hasn’t necessarily been any serious problems with this system.
However, it relies on trusting the bank in the middle. In many countries around the world, the financial system isn’t necessarily as secure or robust and this can lead to problems such as a run on the banks.
Other issues such as corrupt governments or hyper-inflation can also have devastating effects on an individual’s wealth and can give them a reason to want to keep money and assets outside the mainstream financial system.
Even for people who don’t have to deal with these problems, some just believe in being able to conduct their financial business in privacy without a bank or a government being able to track what they’re doing.
That’s all well and good for individuals who have a specific reason to need a decentralized way to use money, but many people don’t. For the majority, cryptocurrency is simply another asset that can be invested in, to potentially make gains and improve their financial position.
For those people, having a trusted third party is a good thing. It gives them a helpline they can call if they have a problem, an account that shows all of their assets in one place and the ability to hold their wealth without needing to remember a 12 word seed phrase or carry around thousands of dollars worth of Bitcoin on a USB stick.
For investors who want to access crypto right now, it’s a risky game. During a crypto bull run, almost everything goes up, and goes up fast. When winter hits, it can be a total guessing game as to which currencies are going to last until the next bull run and which are going to die completely.
You don’t need to look far to find crypto investments like Terra Luna, Celsius and Voyager Digital to see how quickly investments in the space can go pear-shaped.
But whenever you’re looking to buy into any investment asset, getting in when the price is down is a good long term play. It’s a conundrum.
Luckily, to take the guesswork out of investing in crypto, we’ve created our AI-powered Crypto Kit. This kit invests in a diversified mix of cryptocurrencies through a number of digital currency trusts.
These invest in the big names like Bitcoin and Ethereum, while also gaining exposure to smaller caps that can include currencies such as Cardano, Litecoin, Solana and Chainlink. This is automatically rebalanced every week by our AI, to give the best opportunity for risk adjusted returns.
It doesn’t mean it’s not high risk, but it takes the day to day management of the portfolio out of your hands and into the hands of our sophisticated AI and machine learning algorithms.