Despite Regulatory Review of Stablecoins, Mastercard Joins Visa to Offer Cryptocurrency-Friendly Payment Services

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POLAND – 01/03/2020: In this photo a Visa credit card and Mastercard debit cards are … [+] seen posted. (Photo Illustration by Karol Serewis / SOPA Images / LightRocket via Getty Images)

SOPA Images / LightRocket via Getty Images

Electronic payments company Mastercard is streamlining its payment card offerings for cryptocurrency wallet and exchange companies, making it easier for them to offer customers crypto-enabled debit cards.

Today, Mastercard announced a partnership with Evolve Bank & Trust, Paxos Trust Company, a member of Forbes Blockchain 50 2021, and Circle, the main issuer of the world’s second largest stablecoin, USDC, to facilitate issuance. debit cards for crypto companies. and holders to spend their digital assets.

Specifically, Mastercard will pilot new transaction settlement capability with USDC so that crypto card companies avoid the friction associated with direct crypto-to-fiat conversions. Mastercard will accept USDC from card issuers and then exchange fiat stablecoin currency to settle with the merchant in their local currency.

Today, not all crypto companies have the basic infrastructure to convert cryptocurrency into traditional fiat currency, and made it easy, Raj Dhamodharan, executive vice president of digital assets and blockchain products and partnerships at Mastercard, said in a statement. Through our engagement with Evolve, Paxos, Circle and the broader digital asset community, Mastercard expects to deliver on its consumer choice promise by providing options for people around the world on how and when to pay.

Despite this progress, Mastercard lags behind its biggest rival, Visa. In March of this year, Visa became the first payment network to settle a transaction in USDC through a partnership with the first federally chartered digital asset bank, Anchorage. Earlier this month, Visa also partnered with crypto services company BlockFi to offer the world’s first crypto credit card.

While stablecoins such as the USDC have grown rapidly this year, with its current market capitalization in excess of $ 25 billion, they face challenges including regulatory oversight due to their growing presence in the spaces. of crypto lending and investment. Government-issued competitors are also a threat: more than 85 countries around the world are studying or developing their own form of sovereign digital currency, known as central bank digital currency (CBDC). If issued, central bank insured CBDCs would be fierce competitors to stablecoins issued by the private sector such as USDC. Central banks are already making progress: the Bahamas issued the first CBDC, the sand dollar; China is piloting a digital retail yuan in major cities; and last week, the European Central Bank launched its digital euro project.

In addition to exploring CBDC issuance, government regulators doubt the potential of stablecoins. During his testimony last week, Federal Reserve Chairman Jerome Powell expressed skepticism about stablecoins, saying he did not see them becoming an important part of the payments universe. Just yesterday, U.S. Treasury Secretary Janet Yellen convened a President’s Financial Markets Task Force (PWG), joined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, to discuss the regulation of stablecoins. In a reading provided after the meeting, Secretary Yellen stressed the need to act quickly to ensure that an appropriate US regulatory framework is in place.

There also remains significant concern and controversy regarding the build-up of collateral reserves underlying major stablecoins. Industry leader Tether, which has a market cap of $ 64.35 billion, recently released an update to its guarantees in which it revealed that 75% were backed by commercial papers from undisclosed issuers . While the USDC claims to be more transparent and issues regular attestations, it recently invested some of its collateral in unknown short-term assets, which has sparked similar skepticism from regulators and users. In response, Circle CEO Jeremy Allaire pledged to provide greater transparency going forward.

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