MasterCard is expected to open its doors to cryptocurrency as a means of payment later this year. However, this effort will be a challenge for the company. On February 10, MasterCard said that it would begin supporting a select few cryptos on its payment network.
Based on the payment company, the inclusion of cryptos will enable users to “save, store and send money in new ways” while simultaneously opening up new opportunities for all merchants on the platform as well.
This announcement followed a presentation on January 30 where Visa reaffirmed its plans to continue pushing for crypto payments and on-ramps, indicating that the company has long-term plans for the industry. With both of these credit card giant companies on board, it can be safely said that bitcoin is no longer an experimental form of ‘internet money’ but rather it is a new asset class that is here for the long term.
Visa’s and MasterCard’s foray into the crypto space is an excellent example of the ever-growing barrage of mainstream technology and payment firms investing in bitcoin. Thus, they consider it to be an investment, form of payment, and an investment vehicle. The move is bullish since the two payment companies represent billions of payments done every year.
Therefore, it means that although the bitcoin and crypto market is not there yet, this MasterCard and Visa announcement might be the beginning of mainstream adoption. Bitcoin analyst and organizer of the “Unconfiscatable” Bitcoin conference, Tone Vays, said:
“Bitcoin has not yet entered the start of the adoption phase, it is still in the speculation/investment phase. The biggest news surrounding, Elon Musk & Tesla buying Bitcoin as a strategic reserve instead of holding cash. Mastercard & Visa being interested in the first step for actual adoption for users but once users get comfortable using/spending/receiving Bitcoin via Lightning, they slowly start to phase out Visa & Mastercard from their life.”
Let The Bulls In, The Gatekeeper Effect Hits The Market
When MasterCard’s announcement was made, BTC was trading at $46,400. Since then, the crypto has kept on growing to hit new highs above $58,000 although it has recently corrected to the bottom at $44,700.
Additionally, in the week that followed that announcement, the first BTC exchange-traded fund in North America was authorized to operate by the Ontario Securities Commission. Within the first few hours of trading, the platform neared $100 million in trading volume.
Another Bitcoin ETF was also approved by Ontario’s regulator and it is expected to reach $1 billion in assets under management (AUM) by the end of February 2021. Moreover, the world’s biggest custodian bank, Bank of New York Mellon, said that it would roll out a crypto custody service. BlackRock, the biggest asset manager in the world, confirmed that it has started to ‘dabble’ in Bitcoin.
Besides that, all focus is now glued on bitcoin, both among the traditional finance giants and retail Reddit investors. The CEO of Bybit, Ben Zhou, told reporters:
“Crypto Twitter seems to be the happiest corner of the social platform, with laser eyes and whatnot taking over everyone from exuberant crypto accounts to the world’s richest man to two members of the U.S. Congress. This concert of positive signals is feeding back to retail demand and creating a virtuous cycle. And we are seeing the surging interest reflected in Bybit’s fiat-to-crypto onramps and trading volumes.”
MasterCard’s announcement came in at a time when the number of confirmed payments per day on the Bitcoin network has surged continuously. The number of payments on the network is defined as the total number of recipients that get funds in a transaction.
This metric highlights the value of the BTC network as a secure mode of transferring funds without involving any third parties. In the past 12 months, confirmed payments per day have surged from an average of almost 500,000 to reach a peak of 869,000.
What Does This Mean For Cryptocurrency?
Many now ask, what do Visa’s and MasterCard’s endeavors mean for the crypto world? As of Q4 2020, there are 246 million MasterCard credit cards in the US and 966 million globally. On its part, Visa reports that it has 3.5 billion cards in use worldwide and that its network processes more than 140 billion transactions every year.
Both of these major companies have come up with different plans on how they will bring crypto payments into the world of credit card transactions. For now, many questions have been left unanswered by their official announcements, including how they want to do this integration.
While MasterCard’s announcement said that cryptocurrency is coming to the network later in 2021, it does not specify when the service will launch, and what currencies will be available. The payments giant said in its publication that stablecoins may be the first in line for its network. However, other coins might follow later on.
Raj Dhamodharan, Mastercard’s executive vice president of digital asset and blockchain products and partnerships, hinted in a blog post that the company will evaluate possible cryptos to include. The evaluation will be made using its “principles for blockchain partnerships” framework that it unleashed after leaving the Libra Association. It insisted that consumer protection, stability, and regulatory compliance are important.
MasterCard’s and Visa’s integration into the cryptocurrency world is anticipated to make it seamless to use cryptos for daily payments, which may be considered a step forward in cryptocurrency’s quest for mass adoption.
It is still not clear whether merchants will need to opt-in to accept crypto payments or if these new payments will get accepted by default. But, cryptos will become available as a mode of payment at more than 60 million merchants around the world. Nevertheless, the road to mainstream adoption still requires many bricks to be laid.
The founder and CEO of Shopping.io – an online shopping aggregator that offers crypto payment methods for retail shoppers – Arbel Arif, told reporters:
“It will be a long process with a lot of development and quality assurance. Especially with crypto which may seem to miss the mark with being user-friendly. As for the initial adoption on a mainstream level, it is a journey and a marathon. Not a sprint. We will likely see more and more companies coming forward in the oncoming months and years announcing adoptions on a small level with crypto before bigger plans are put into motion.”
A major increase in demand may further increase the supply squeeze that has taken over the crypto market and further help the prices to move up. However, so far MasterCard is working with the Bahamian Sand Dollar, which is the first central bank digital currency (CBDC) to be launched globally.
In another official announcement, the payments giant unveiled a prepaid MasterCard that enables users to pay for services and goods using the Sand Dollar wherever the MasterCard is accepted globally. However, it highlighted that cryptos like BTC will be used in its network in the future.
Crypto Debit Cards Are Already Out There
Both MasterCard and Visa have already been corporating with many crypto firms to issue crypto debit cards that enable users to pay for services and goods with their holdings are millions of merchants globally.
Binance, Nexo, Crypto.com, Coinbase, BlockFi, and others have issued crypto debit cards. These cards include cashback rewards that come in the form of cryptos. In 2020, Coinbase became a full-standing Visa member that can issue its customized cards. The head of data science at data analytics firm Flipside Crypto, Eric Stone, told reporters that many other such announcements will follow soon:
“I view this as part of the broader, inevitable influx of institutional interest and adoption of blockchain technology. I and many other close observers of the space have seen this kind of news as a matter of when, not if.”
Cryptocurrency debit cards differ from the normal MasterCard and Visa cards since they offer their users exciting perks, and cryptos themselves can act as bridges connecting fiat currency exchange rates when traveling.
A majority of the debit cards are now already supported by mobile payment solutions like Google Pay, Apple Pay, and Samsung Pay. It is now possible to manage what cryptos are used to pay via a mobile app which makes it easier to select what to spend at any given time.
But, the existing crypto debit cards normally have considerably high fees that are associated with payments processing and changing crypto-assets into the fiat currency that the merchants receive. Additionally, some of the debit card providers need users to stake large amounts of their tokens to enjoy the best rewards.
Nonetheless, there are various advantages that crypto projects bring to the table. Eventually, only the citizens of a select group of countries can access the most popular cards.
How Much Mainstream Can Bitcoin Get?
There are still lots of unanswered questions about MasterCard’s and Visa’s approaches to processing crypto payments via their networks. But, it is clear that these firms moving into the crypto industry enhances the legitimacy of the sector.
Ever since PayPal started letting its clients buy, sell, and hold cryptocurrency on its platform. Bitcoin and many other crypto assets have been also authenticated as their asset class that is now being accepted by traditional finance firms.
Several years ago, in the minds of an average consumer, cryptos were mainly associated with darknet markets selling illegal goods and with wild speculation. Currently, bitcoin is getting recognized as a store of value, with even the publicly traded firms have been investing in cryptocurrency.
So, has BTC finally made it? Has mainstream adoption come? The managing partner of Cointelligence Fund, On Yavin, told reporters that crypto is indeed gaining massive momentum than ever before. He added:
“But we still have a lot of work ahead of us to make cryptocurrency markets mainstream. Despite some regulators and financial institutions still fighting the crypto revolution, many have started to understand the value of both blockchain technology and crypto-assets. The future is bright and it is up to our industry to continue to educate and innovate to overcome the regulatory hurdles ahead.”
MicroStrategy has already invested $1.145 billion to buy 71,079 BTC, which is now worth over $3 billion at the time of writing. Tesla announced a $1.5 billion investment with the company believed to have bought 48,000 BTC at an average price of $31,250 per token. At the current prices, the carmaker would now hold about $2.3 billion.
Square, MassMutual, Ruffer Investment, and many others have also invested in the crypto, enabling its market cap to surpass $1 trillion. But, the recent correction on February 22 has pushed the market cap back below those levels.
While bitcoin now seems to be very popular, market data shows otherwise. Based on Goggle Trends data, search interest for ‘bitcoin’ remains relatively below the levels seen back in 2017, despite the considerable price increase and growing institutional adoption.
What that likely means is that big investors and corporations are pushing the markets higher, as the retail investors are mainly sidelined. Nevertheless, when it comes to the general public outlook, the acceptance and adoption by these giant companies might change how the retail investors and shoppers look at cryptos.
Based on the statement by Arif:
“large companies acting as a bridge that connects the common shopper to cryptocurrencies like this is pivotal for the entire industry as crypto is being taken seriously worldwide as a form of payment.”
Is mass adoption closer than earlier thought?
