The no-love-lost relationship between digital currencies and the traditional banking system is not a recent phenomenon. It has been around ever since the first decentralized cryptocurrency, bitcoin, came into existence back in 2009.
The strained relationship is of course not void of valid underlying reasons, after all, decentralized digital tokens are all about peer-to-peer transactions that, by design, leave no room for intermediaries (read: banks). That is why banks consider digital currencies a direct threat to their monopoly over financial transactions. So it was somewhat unusual when a senior executive from MasterCard said that the company was open to the overall use of cryptocurrencies.
Note that this is not the first time the American multinational financial juggernaut has reacted to the rapidly evolving realm of digital currencies. Earlier when top executives representing the company expressed their views on the crypto economy, the words that came out were not exactly flattering. In fact, in September 2017, Mastercard’s chief executive Ajay Banga went as far as calling bitcoin a “bubble” and a “junk.” Not only that, but the company also took steps to make it more robust to buy bitcoin on its network.
So what could prompt the company to take such a radically different stand? Well, it turns out….
There’s a Catch!
While it may appear as though Mastercard has reconsidered its stand on digital currencies, in reality, it hasn’t, well, not radically, at least. In his recent conversation with the Financial Times, Ari Sarker, co-president of MasterCard’s Asia-Pacific unit said that the company was “very happy” to encourage the use of cryptocurrencies. But there is a catch here.
Sarker also stated that the credit card issuer was willing to be more open to cryptocurrencies so long as central banks issue them. That essentially means that the company has not developed a soft spot for bitcoin, ethereum, litecoin, monero, and other popular decentralized coins. Sarker told the Financial Times:
“If governments look to create national digital currency we’d be very happy to look at those in a more favorable way [compared with existing cryptocurrencies],”
He added: “So long as it’s backed by a regulator and the value . . . . it is not anonymous, it is meeting all the regulatory requirements, I think that would be of greater interest for us to explore.”
It is worth mentioning here that Mastercard has approved a pilot program in Singapore and Japan which enables customers to cash out bitcoin and other digital currencies straight on to their cards. While it appears to be a deviation from the company’s official stand on digital coins, Sarker insists that it is not. According to him, not only does the program not involve crypto trading, but it also comes with stringent rules such as KYC and a robust anti-money laundering mechanism.
Visa is in No Mood For Reconciliation Either
Mastercard rival Visa is just as adamant as all major financial institutions when it comes to rejecting cryptocurrencies. In fact, the company’s chief financial officer Vasant Prabhu recently went as far as saying that digital coins are used by “every crook and dirty politician,” as well as clueless speculators.
Visa, with its current market cap of nearly $279 billion, has been bombarded with questions from investors and market observers about the possibility of its business model being disrupted by fast-evolving emerging payment systems. The company has so far dismissed all these concerns as baseless.
However, whether or not it follows suit to take a similar stand on the use of cryptocurrencies as MasterCard remains interesting to see.