Mastercard and Visa’s Strategic Foray into Crypto

Mastercard and Visa’s Strategic Foray into Crypto

Mastercard is integrating advanced technologies with major banking institutions to enhance cryptocurrency transactions and settlement systems. They are set to become a pivotal players in the evolving digital currency landscape.

Mastercard has teamed up with leading U.S. banks, including Citigroup, Visa, and JPMorgan, to explore a new way of handling settlements across different types of assets using a technology called a shared ledger. 

This technology, known as the Regulated Settlement Network (RSN), allows for the tokenisation of assets like government bonds, high-quality debt, and bank-issued money, enabling them to be settled together on one platform.

Traditionally, these assets are handled through separate systems, but with RSN, they are converted into digital tokens and managed collectively on a single system.

 This method aims to simplify the settlement process by using a distributed ledger—a type of database spread across several sites, countries, or institutions, ensuring secure and transparent transactions.

This initiative is part of a broader trial that began with a 12-week pilot in late 2022, initially focusing on cross-border and domestic dollar transactions between banks. 

The first phase of Mastercard on a distributed ledger

The current phase is experimenting with simulating settlements in U.S. dollars to refine the process.

Mastercard’s recent announcement highlighted the potential benefits of this technology, such as enhanced efficiency in cross-border settlements and a reduction in errors and fraud risks. 

Raj Dhamodharan, who leads Mastercard’s blockchain and digital assets efforts, emphasised that this approach could revolutionise market infrastructure by enabling around-the-clock, seamless settlements.

The RSN Proof of Concept (PoC) has been expanded with two notable additions: interbank tokenised deposit networks, featuring the USDF Consortium as a key participant and the Tassat Group as a contributor

Additionally, the consulting giant Deloitte is providing advisory services. The Securities Industry and Financial Markets Association is overseeing the program.

There are ten major banking participants in the project: Citi, JPMorgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp.

Furthermore, six additional participants are contributing their specialized expertise, including the nonprofit MITRE Corporation, BNY Mellon, Broadridge, the DTCC, ISDA, and the Tassat Group.

Catalysing cryptocurrency adoption and utility

The collaboration between Visa and Transak, a Web3 infrastructure service, has garnered attention, particularly among crypto wallet users like those of MetaMask, Ledger, and Trust Wallet. 

This partnership is significant as it simplifies the process of converting cryptocurrency into fiat currency. 

Visa now allows crypto to be directly converted into local fiat at over 130 million merchant locations across 145 countries. This development is particularly notable because it supports around 40 types of cryptocurrencies.

The implications of this advancement extend beyond convenience for cryptocurrency users. 

The involvement of Visa and Mastercard in the crypto sector signifies a crucial shift, potentially indicating a bullish trend for the market. 

Despite previous hesitations, such as Visa’s reported step back from crypto partnerships last year, the current engagement suggests a strategic recalibration in response to positive market movements, such as rising Bitcoin prices and significant crypto events like Bitcoin halving.

Implications for Centralized and Decentralized Crypto Exchanges

This shift might pose a challenge to centralised crypto exchanges like Coinbase and Binance, as users now have the option to bypass these platforms for certain transactions. 

However, the broader adoption of cryptocurrencies facilitated by Visa and Mastercard could benefit the entire industry, including decentralised finance (DeFi) and centralised exchanges (CEXs). 

The role of CEXs remains crucial in ensuring the scalability, reliability, and security of crypto transactions.

The entry of major payment networks into crypto payments also addresses the ‘network effects’ barrier, where the utility of new forms of money increases as more people and merchants accept them. 

By enabling real-time conversion of cryptocurrencies to fiat, Visa and similar entities are making cryptocurrencies a more practical medium of exchange.

However, this integration comes with trade-offs, particularly concerning the decentralisation and privacy aspects that are foundational to cryptocurrencies. 

The involvement of traditional financial entities in crypto payments might dilute some of these core principles, although it could also lead to greater mainstream adoption and acceptance of cryptocurrencies as a part of everyday financial transactions.

Crypto Innovations by Visa and Mastercard: Next-Gen Stablecoin Payments and Cutting-Edge User Verification Solutions

Crypto Innovations by Visa and Mastercard: Next-Gen Stablecoin Payments and Cutting-Edge User Verification Solutions

  • Both Mastercard and Visa continue to expand their presence in the crypto sector with new initiatives and collaborations.
  • Visa’s crypto division is building the “next generation of products” for digital commerce and is seeking to hire software engineers with Web3 and blockchain experience.
  • Mastercard launches “Mastercard Crypto Credential,” a Web3 user verification solution designed to enhance user verification standards and reduce opportunities for bad actors in the digital asset space.
  • Mastercard partners with crypto wallet providers Bit2Me, Lirium, Mercado Bitcoin, and Uphold, as well as blockchains Aptos, Avalanche, Polygon, and Solana.

Visa is paving the way for the mainstream adoption of stablecoin

Visa is working on a new crypto project that aims to make public blockchain networks and stablecoin payments more popular and widely used. 

As a major global payment company, Visa is looking into how cryptocurrencies can be helpful by focusing on a new plan related to stablecoin payments. On April 24, Cuy Sheffield, the person in charge of crypto at Visa, shared news about this new project on Twitter.

Visa is working on a new crypto project that aims to make blockchain networks and stablecoin payments more common and widely accepted. Sheffield, who’s in charge of the project, mentioned this in a tweet. 

On April 20, Visa shared a job ad, saying they’re creating new, advanced products to help with everyday digital shopping.

To create this product, Visa wants to hire software engineers who know about programming, backend systems, and Web3 technologies. Sheffield tweeted that they’re especially interested in those with experience using Github Copilot and other AI tools for writing and fixing smart contracts.

Ideal candidates should know about layer 1 and layer 2 solutions and have experience with Solidity, a programming language used for smart contracts on the Ethereum Network. Solidity helps create smart contracts on blockchain platforms and keeps track of transactions in the system.

Crypto Innovations by Visa and Mastercard

The job also needs candidates to know about different types of distributed ledger networks (public and permissioned), security measures, handling private keys, and new improvements in Ethereum, like ERC-4337. 

Visa, one of the biggest payment companies, started getting involved with crypto in 2020. They teamed up with blockchain company Circle to allow USD Coin (USDC) stablecoin on some credit cards. 

Visa has been slowly growing its crypto services, but they stopped some new partnerships because of the 2022 crypto market downturn and big failures like Celsius and FTX.

Mastercard is enhancing user verification and strengthening security in the digital asset space

Mastercard’s new approach focuses on offering safe transactions between users, verified based on the company’s standards. 

The worldwide financial company, Mastercard, introduced a new Web3 solution to improve user verification and limit chances for wrongdoers in the digital asset area. 

They announced the “Mastercard Crypto Credential” solution on April 29. In a video shared on Twitter, the company explained that they are creating a method for Web3 and blockchain services to ensure secure transactions between users, following Mastercard’s verification standards.

With this solution, users get a unique “Mastercard crypto credential” identifier, allowing them to quickly check if a receiving address is approved by Mastercard and follows the company’s rules. Mastercard’s solution also supports regulatory compliance by exchanging important metadata needed to meet requirements. This helps limit chances for wrongdoers and reduces the risk of losing funds permanently.

If any bad actors manage to get a unique identifier, Mastercard can quickly take away their verification if they’re found involved in harmful activities. The company has partnered with many others for this solution:

  • For crypto wallets, they’ve joined forces with Bit2Me, Lirium, Mercado Bitcoin, and Uphold. 
  • For blockchains, they’ve teamed up with Aptos, Avalanche, Polygon, and Solana. 

Mastercard also plans to use CipherTrace’s services, including CipherTrace Traveler, to verify addresses and ensure compliance with the Travel Rule for cross-border transactions.

Over the past few years, Mastercard has been increasing its involvement in the crypto sector. Recently, they announced a nonfungible token (NFT) musician accelerator program in partnership with Polygon. 

The program provides free access to resources, unique AI tools, and other experiences for holders of Mastercard’s Music Pass NFT until the end of April.