Digital currencies are becoming increasingly popular and one of the primary reasons people are attracted to them is their lack of governmental intervention in the way they operate.
Apart from being an attractive fiat alternative, cryptocurrency is a direct threat to the financial monopoly being held by financial institutions. This fuels confrontation from financial bodies. Still, one of the largest credit card establishments worldwide has stepped forward to support the future’s money.
Credit card issuer, Mastercard, is open to using cryptocurrency; however, there is a catch involved. MasterCard has adopted blockchain technology while dismissing virtual cryptocurrencies like Bitcoin. While it will consider the use of cryptocurrencies, it is not ready to risk the monopoly characteristics held by banks and other financial institutions. The announcement should not excite many people, especially cryptocurrency investors.
There are two things associated with this kind of allowance: It is either the cryptocurrency loses its independence of operating without banks, or they must be ready for the stiff competition that might emerge. Before this slight backpedaling, earlier MasterCard had stated that it was not willing to accept cryptocurrency:
“Over the past few weeks, we have clarified to acquirers – or the merchant’s bank – the right transaction or merchant category code to use for these type of transactions (cryptocurrency purchases). This provides a consistent view of such purchases for both merchants and issuers.”
What’s the catch?
It is evident from Sarker’s comment that MasterCard seems to have a game plan of how it is going to operate using cryptocurrencies.
“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].”
Any cryptocurrency has to adhere to specific rules and principles to work with MasterCard. Banks, like any other businesses, want to make as much profit as possible, MasterCard’s actions aim to ensure they can make more profits.
MasterCard backing the use of cryptocurrency issued only by central banks is not just a way of exercising full power, but they also are trying to be cautious. We have all heard the cases of losses incurred due to Bitcoin hacking.
Banks are not ready to receive that risk, and it is essential the process gets completed under strict adherence to the rules and regulations. Mr. Sarker talks about the strict regulations of know-your-customer well, and anti money-laundering controls and has no exposure to Bitcoin’s price, which fluctuates wildly.
“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 hard to tell the future of unregulated cryptocurrencies as they are associated with many risks.
The crypto-market may not lose out here
MasterCard’s proposal could act as a green light, allowing reforms to take place and the cryptocurrency community will be more keen on security rather than just making quick profits.
FDIC insures banks, but cryptocurrencies are stored in a ‘digital Wallet’ which exists in the cloud or the user’s computer; a virtual bank account that allows users to send and receive cryptocurrencies such as Bitcoin anonymously.
Cryptos might start considering insuring themselves to attract more customers. Through such actions, there is a probability that they will attract more customers, hence will become a win-win situation for both MasterCard and Cryptocurrencies. Such regulation will help build trust and encourage more people to use cryptocurrency in the long-run.