Electronic payments company Mastercard is streamlining its payment card offerings to crypto wallets and exchange companies, making it easier for them to offer crypto-enabled debit cards to customers.
Today, MasterCard announced a partnership with Evolve Bank & Trust, Paxos Trust Company, a member of the 2021 Forbes Blockchain 50, and Circle, the main issuer of the world’s second largest USDC stablecoin built on the Ethereum blockchain, to make it easier for crypto companies to issue debit cards and their holders to spend their digital assets.
Specifically, Mastercard will be piloting a new ability to settle transactions with USDC so that companies that issue crypto cards avoid the friction that comes with making direct transfers from crypto to fiat. MasterCard will accept USDC from card issuers and then exchange the fiat stablecoin for settlement with the merchant in their local currency.
“Not all crypto companies have the basic infrastructure to convert cryptocurrency to traditional fiat currency, and we are making it easier,” said Raj Dhamodharan, Executive Vice President of Digital Assets, Blockchain Products and Partnerships at Mastercard. “By partnering with Evolve, Paxos, Circle, and the larger digital asset community, Mastercard expects to deliver on our promise of consumer choice to provide people around the world with choices about how and when to pay.”
Despite this progress, Mastercard stands behind its biggest competitor, Visa. In March of this year, Visa became the first payments network to settle a transaction in USDC by partnering 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 like the USDC have experienced rapid growth this year – with their current market capitalization in excess of $25 billion – they are facing challenges including regulatory scrutiny due to their increasing presence in the crypto lending and investment spaces. Government-issued competitors also pose a threat: more than 85 countries around the world are investigating or developing their own form of sovereign digital currency, known as a central bank digital currency (CBDC). If issued, central bank-guaranteed coins would be a fierce competition for privately issued stablecoins like USDC. Central banks are already making progress: The Bahamas has released the first digital central bank digital currency, the sand dollar; China is piloting retail digital yuan in major cities; And just last week the European Central Bank launched its digital euro project.
In addition to exploring the issuance of digital central bank currencies, government regulators are skeptical about the stability of the currency’s potential. During his testimony last week, Federal Reserve Chairman Jerome Powell expressed his skepticism toward stablecoins, stating that he does not see them becoming an important part of the payments world. Just yesterday, US Treasury Secretary Janet Yellen convened the President’s Working Group on Financial Markets (PWG), joined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, to discuss stablecoin regulations. In a statement provided after the meeting, Secretary Yellen “emphasized the need to move quickly to ensure an appropriate regulatory framework for the United States is in place.”
There is also still a lot of concern and controversy surrounding the creation of additional reserves that support the major stablecoins. Tether, the industry leader, with a market capitalization of $64.35 billion, recently issued an update to its collateral where it revealed that 75% was backed by commercial paper from two undisclosed sources. While the USDC claims to be more transparent and issues regular certifications, it has recently invested some of its collateral in unknown short-term assets, which has led to similar skepticism from regulators and users. In response, Circle CEO Jeremy Allier It promised to provide better transparency in the future.