Mastercard preparing for a future of crypto
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Mastercard has revealed preparations are underway for the “future of crypto and payments”, hoping to start supporting select cryptocurrencies directly on its network later this year.
“This is a big change that will require a lot of work. We will be very thoughtful about which assets we support based on our principles for digital currencies, which focus on consumer protections and compliance,” a blog post penned by Mastercard’s digital asset and blockchain VP Raj Dhamodharan says.
“Whatever your opinions on cryptocurrencies – from a dyed-in-wool fanatic to utter sceptic – the fact remains that these digital assets are becoming a more important part of the payments world.”
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Dhamodharan said Mastercard is seeing cardholders buy crypto assets and that it’s also seeing use of crypto cards to access these assets and convert them to traditional currencies for spending across its network.
“Our philosophy on cryptocurrencies is straightforward: It’s about choice,” he said. “Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants, and businesses to move digital value.”
The company believes progressing work on crypto on its network will create a lot more possibilities for shoppers and merchants. But not all cryptocurrencies will be supported, as many of the digital assets in circulation still need to tighten their compliance measures before they can meet Mastercard’s requirements.
“We expect consumers and the ecosystem as a whole will start to rally around the crypto assets that offer reliability and security. It’s those very same stablecoins that we expect to bring into our network,” Dhamodharan said.
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“We are already working hard to provide this consumer choice for cryptocurrencies.”
Before cryptocurrency can become transacted on the Mastercard network, the company will need to determine consumer protections, including privacy and security of consumers' information; strict compliance protocols, including Know Your Customer, to snuff out illegal activity and deception in payment networks; the digital assets must follow local laws and regulations in the regions they are used; and ensure the stability of the cryptocurrency, to some degree.
Mastercard last year teamed up with Wirex and BitPay to create crypto cards that allow people to transact using their cryptocurrencies; it then joined forces with cryptocurrency exchange LVL to do much of the same.
In these instances, however, cryptocurrencies don’t move through the Mastercard network, rather its partners convert the digital assets to traditional currencies, then transmit them through to the Mastercard network.
“Our change to supporting digital assets directly will allow many more merchants to accept crypto – an ability that’s currently limited by proprietary methods unique to each digital asset,” Dhamodharan explained. “This change will also cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases.”
In addition to forging further crypto exchange partnerships, Mastercard is also working with several major central banks around the world as they respectively review plans to launch new digital currencies.
Mastercard boasts 89 blockchain patents, with an additional 285 blockchain applications pending.
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Anti-Privacy Regulations Pose Risks for Crypto Investors, Bank of America Says
A Bank of America cryptocurrency report warns of the risks and potential market disruption from anti-privacy government measures.
Cryptocurrencies “challenge the ability of governments to levy taxes and to control capital flows more broadly,” according to a recent report from Bank of America Securities obtained by CoinDesk. Uncertainty over how the U.S. governments will act to limit these use cases presents an key risk for cryptocurrency investors.
“Encrypted private wallets with digital assets that can be transferred across borders would seem to undermine
the monetary sovereignty of every nation-state,” the report says.
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In an “extreme case,” regulators could simply ban all institutions and intermediaries from transacting with cryptocurrencies. Or the government could increase customer information reporting and access requirements for cryptocurrency exchanges, which the report describes as a more plausible possibility.
Also, support for central bank digital currencies (CBDCs) are not “just a form of payments competition,” the report says. “They are also an effort to replace private digital assets with publicly-controlled ones.”
How effective state-run counter-privacy measures will be is a separate question. The authors admit that no matter how burdensome, anti-privacy regulatory changes “might instead be meaningless”. Users committed to transaction privacy “could potentially create a second ‘truly private’ wallet to which they send currency from their now-public wallet, and continue to make anonymous cross-border transactions.” “At some threshold, banning private digital assets would become too politically risky, too disruptive to constituents,” the report says. But carefully targeted regulations designed to restrict privacy could impose a “serious burden” on users.
Crypto is here to stay, but bitcoin is in a ‘massive bubble’: Rosenberg
Crypto is here to stay, but bitcoin is in a ‘massive bubble’: Rosenberg
Cryptocurrencies are here to stay but impossible to value: David Rosenberg
Bay Street veteran David Rosenberg isn’t buying into the hype swirling around bitcoin.
In a television interview, Rosenberg, chief economist and strategist at Rosenberg Research & Associates Inc., said that while cryptocurrencies are here to stay, there’s no rational explanation for the massive run-up in the price of bitcoin.
“Crypto is here to stay. It has a function in the capital markets. But valuing it is next to impossible,” he said. “So all you really have to do is look at the price, and look at the chart, and you can see it’s a massive price bubble. The chart itself is telling you that.”
Bitcoin prices briefly eclipsed the US$48,000-per-coin mark on Tuesday, marking a new record high. The most recent run was buoyed by Tesla’s disclosure it had bought US$1.5-billion worth of the cryptocurrency and had plans to begin accepting it as payment for its electric vehicles.
BNN BLOOMBERG POLL:
Do you agree with the Bank of Canada that there’s a “speculative mania” in cryptocurrencies? — BNN Bloomberg (@BNNBloomberg) February 10, 2021
While the cryptocurrency has found itself a high-profile fan in the form of Tesla Chief Executive Officer Elon Musk, Rosenberg said a continued run higher is a matter of faith on the part of bitcoin acolytes, not a matter of fundamentals.
“In three words or less: Greater fool’s theory. You’re buying bitcoin on the assumption that some bigger fool is going to buy it at a higher price,” he said. “The question you have to ask yourself is: ‘How do you value bitcoin?’ It’s not a stock. You can’t do any cash-flow analysis.”
Rosenberg’s criticisms come the same day Bank of Canada Deputy Governor Timothy Lane dismissed the recent boom in cryptocurrencies as a “speculative mania.” He argued the digital tokens don’t have the qualities necessary to become the currency of the future, given the volatile price moves.
“The recent spike in their prices looks less like a trend and more like a speculative mania – an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price,” Lane said.
While the central bank has been studying the circumstances that could lead it to launching a digital loonie, should the need present itself, Lane said that such a scenario is by no means a certainty.
“Our view remains unchanged: A digital currency is by no means a foregone conclusion.”