For digital assets like Bitcoin to evolve beyond just a ‘store of value’, meaningful adoption needs to occur among merchants, allowing consumers to spend them like FIAT. This however is not possible until sufficient infrastructure is developed by existing payment processors/gateways (i.e. Mastercard).
Thankfully, 2021 has been quite kind to digital assets, as this is a trend that is gaining momentum. The following are examples of major steps being taken by such companies, painting a bright future for digital assets – much to the chagrin of central banks.
Currently, the Mastercard network is comprised of roughly 1 billion users and 30 million merchants. This is a massive trove of users, which will soon gain exposure and access to digital assets.
Mastercard has just announced that in 2021, it will be bringing support for a variety of digital assets on its network. This means enabling merchants to be paid in assets like Bitcoin, in addition to launching crypto based debit cards, and more. Mastercard indicates that its reasoning for this is simple – swim with the current rather than against it. The company has recognized that digital assets are here to stay, and is tailoring its services accordingly, so that it isn’t left behind while the rest of its competitors adapt and thrive.
“…digital assets are becoming a more important part of the payments world…the trend is unmistakable.”
Different companies have different philosophy’s surrounding digital assets, however to hear that of Mastercard is somewhat refreshing. The company states,
“Our philosophy on cryptocurrencies is straightforward: It’s about choice. Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want. It should be your choice, it’s your money.”
Although the company has not specified which digital assets it will support, it has implied that it will be numerous. Those looking to be included must satisfy the following key issues in the eyes of Mastercard.
- Consumer protections (data privacy/securitY)
- Regulatory compliant
- Stability (must function as a currency, not simply an investment)
It should be noted that the digital assets to be supported by Mastercard in the near future are not limited to offerings like Bitcoin and USD Coin. Support will extend to include the inevitable pool of central bank digital currencies (CBDCs). While support for these assets may be slightly further away, as most examples of CBDCs are still in their developmental phase, Mastercard indicates that it is already working with central banks, and that this support IS coming.
When thinking of Mastercard, most would agree that it has one clear rival above all others – VISA. With this being the case, don’t think for a moment that Visa will not follow Mastercards lead in supporting digital assets. The potential reward, and risk of being left behind, are each too great.
For now, Visa has recently announced an equally promising endeavor surrounding digital assets. It is currently piloting a program which makes use of ‘crypto APIs’. This will allow traditional banks to begin supporting digital assets, by accessing already established infrastructure through an API. The pilot program is expected to launch in full later this year.
With regards to integrating digital assets on its own platform, we know that it is coming – Visa has already stated this. Time will tell how this integration takes shape, and if it will closely resemble the aforementioned announcement by Mastercard.
While each Mastercard and Visa have been researching and developing a game-plan surrounding digital assets for years now, it is perhaps PayPal which can be credited for spurring them in to action.
In late 2020 PayPal became the first company of its stature to announce the impending support for merchant spending of digital assets like Bitcoin. Although this particular service has yet to launch, its announcement resulted in a massive amount of interest in the sector being generated.
With multiple month’s head-start over Mastercard and Visa, PayPal should be well-poised to hold its own against the former. One potential boon it has over the others is its already launched trading service, which has seen above-expected levels of adoption to date.
A Harsh Take
Despite three of the world’s largest payment processors/gateways announcing meaningful adoption of digital assets, and various high-profile companies (i.e. Tesla) allocating capital reserves to Bitcoin, traditional banks remain blinded by antiquated views. These views typically paint digital assets as only being used by criminals, and untrustworthy.
In a recent speech by representatives of the Bank of Canada, it was made clear that the central bank does not view cryptocurrencies in a positive light.
“Even in this increasingly digital economy, though, cryptocurrencies such as bitcoin do not have a plausible claim to become the money of the future. They are deeply flawed as methods of payment—except for illicit transactions like money laundering, where anonymity trumps all other features—because they rely on costly verification methods and their purchasing power is wildly unstable. The recent spike in their prices looks less like a trend and more like a speculative mania—an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price.”
A Willful Ignorance
As 2021 trudges along, the case for digital assets continues to strengthen. Just in the past few months we have seen the following examples of this.
Massive companies allocating billions worth of capital reserves in to Bitcoin? Check.
Major exchanges supporting digital asset funds and futures contracts? Check.
Blockchain companies going public? Check.
Leading payment processors/gateways enabling merchant spending of digital assets? Check.
As a certain point, digital assets cannot be brushed off by traditional banks and governments as a speculative bubble, with no real future. Given the amount of adoption to date, and that which has already been announced for the near future, deniers are teetering on the edge of willful ignorance it would seem.