Mastercard recently announced a partnership with the cryptocurrency trading platform Paxos. The supposed goal of the partnership is to offer a program that will assist financial institutions in offering cryptocurrency trading.
According to the details of the announcement, Mastercard will serve as a “bridge” between the crypto trading platform Paxos and PayPal to provide a comparable service, and banks Mastercard and Paxos will handle regulatory compliance and security, two of the main reasons banks avoid the asset class.
Institutional Reluctance Amidst Mass Adoption
In the past, Goldman Sachs and other large investment banks, like Morgan Stanley and JPMorgan, have devoted cryptocurrency teams but mostly avoid offering it to consumers. JPMorgan CEO Jamie Dimon recently referred to cryptocurrencies as “decentralized Ponzis” at a public event. According to CNBC news, if banks adopt this Mastercard partnership model, Coinbase and other exchanges in the United States may face increased competition.
The entire financial sector is aware that the demand for Bitcoin and other cryptocurrencies has increased at an exponential rate. However, given the market’s volatility, some remain sceptical. Volatility, on the other hand, has dropped dramatically. Bitcoin, in particular, is no longer as volatile as it once was.
Jorn Lambert, Mastercard’s chief digital officer, stated that 60% of participants preferred to invest in cryptocurrency through existing banks rather than exchanges. Mastercard has designed its latest initiative in response to this demand. Lambert elaborated on the same, saying, “There’s a lot of consumers out there that are really interested in this, and intrigued by crypto, but would feel a lot more confident if those services were offered by their financial institutions. It’s a little scary to some people still.”
Furthermore, Lambert believed that cryptocurrency was not yet mainstream. He predicted that it was the “cusp of really going mainstream.” He further stated, “It’s hard to believe that the crypto industry will truly go mainstream without embracing the financial industry as we know it.”
Mastercard’s New Program, Crypto Source
In the Paxos partnership announcement, Mastercard detailed that its crypto offerings will be done through its new program, Crypto Source. As of now, Mastercard’s suite of crypto products includes several solutions, such as security management, technology to facilitate crypto asset trading, crypto program management, and other services.
Security management includes Mastercard’s identity solutions, crypto analytics, transaction monitoring, anti-money laundering, ‘Know Your Business’ and lifecycle stages, biometrics, and cybersecurity.
Crypto Source’s crypto program management services include program design, development, technology implementation, market optimization, and marketing consulting, allowing banks, fintech organizations, and issuers to offer crypto programs at scale.
“What we are announcing today is a connected approach to services that will help bring users safely and securely into the crypto ecosystem,” said Ajay Bhalla, Mastercard’s cyber and intelligence president. “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.”
In regards to the partnership, Walter Hessert, Head of Strategy at Paxos, stated, “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.”
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