The year your great-grandpa bought bitcoin
This year has been tough for many companies in the crypto market. Some have collapsed altogether, others have fired a huge number of employees to keep their heads above water and some are going all in on crypto.
It’s no secret that in 2022 the price of bitcoin and other cryptocurrencies have been tumbling, and on the surface, it looks like the bears beat the bulls.
But, nothing could be further from the truth. The fact is that we are in the most “bullish” bear market we’ve ever seen.
In previous crypto winters, we didn’t have massive investment banks like JPMorgan and Goldman Sachs with dedicated crypto teams, we didn’t have celebrities and huge brands filing for trademarks on the metaverse, we didn’t have crypto logos on the jerseys of professional sports teams and we certainly didn’t have countries making bitcoin a legal tender.
What should be evident beyond the dropping prices of the coins, is that crypto is becoming more popular and even more accessible than ever before.
Speaking of accessibility, Mastercard’s announcement last week of “Crypto Source” is big news. Mastercard will offer a service that will make it easier for banks to offer crypto trading services to customers.
Mastercard is teaming up with the crypto platform Paxos and will act as a “bridge” between the crypto platform and banks. The service will be launched in the U.S., Israel, and Brazil in early 2023 as part of a pilot program. Mastercard’s program will handle everything for banks when it comes to crypto trading —regulatory compliance and security.
With this recent move, Mastercard is looking to bring crypto to the masses by making it easier for banks to offer crypto trading services.
In the financial and crypto world, there are not many companies that are more respected than Mastercard and its partner Paxos —the company Paypal uses for their crypto offerings, and Binance partnered with it to launch BUSD, its USD-Backed stablecoin.
Banks have avoided cryptocurrencies up to now for several reasons that include regulation and security. The new program from Mastercard and Paxos addresses all the reservations that have kept banks from getting into the market.
Essentially, Mastercard is building a massive onramp for banks, saying to them, don’t worry we’ll handle the regulatory compliance issues, we’ll handle trading, custody, and security, and all you need to do is plug into our system and offer it to your customers. With Mastercard taking responsibility for crypto compliance, transactions, AML, and identity monitoring, there are not many reasons left for banks to say no.
But, for existing exchanges, the new Mastercard program may be bad news.
It certainly seems possible that a large number of retail investors could choose to trade cryptocurrencies using an account held with their bank, instead of using much younger and less established cryptocurrency exchanges. Potentially, the Mastercard program will route orders from banks to Paxos, which could affect revenues for Coinbase, Kraken, Gemini, and other exchanges operating in the US and elsewhere.
However, if Mastercard’s program is successful, we will see banks, that don’t opt to go through Mastercard, create their own crypto trading services and partner directly with crypto exchanges.
For retail investors, there will be some great side effects with more choices of trading venues and competitive fees. We may even see more subscription models emerge, like Coinbase One.
Crypto is a strategic position for Mastercard, which has been at the forefront of driving cryptocurrency integration.
Everyone knows Mastercard because of its cards. Crypto represents a way for the company to move beyond plastic and fortify its business in moving value, while it continues being in the middle of everything when it comes to payments.
Mastercard’s larger vision is to utilize the growing interest in cryptocurrencies by providing seamless crypto transactions. Mastercard is making some interesting plays that will not only generate an alternative revenue stream but will also cement its position in the payment industry. This recent move further solidifies Mastercard’s work and ambitions in the crypto space and could be a strong catalyst.
The company has embarked on an aggressive strategy to build a crypto stronghold and make crypto accessible to its massive user base and customers —financial institutions. It has 89 blockchain patents, it has filled 15 trademarks related to the Metaverse, and 285 blockchain applications pending.
Mastercard’s customers have issued about 3 billion cards as of December 2021. The future is going to be multichain and multicurrency —hopefully, bridges will become a lot safer— and this is why Mastercard is entering the market faster than many of its rivals and before crypto goes mass and spins out of control.
Mastercard launched its Crypto Card Program and partnered with Circle, Paxos, Uphold, and Galileo Financial Technologies. It acquired the blockchain intelligence company CipherTrace last year. In April, it announced a crypto rewards credit card with Gemini —I love the idea of spending my “dirty” fiat money and getting crypto rewards. And it unveiled a partnership with Nexo for a payment card based on a crypto-backed credit line —users can spend without having to sell their digital assets, which are used as collateral to back the credit granted.
When the rest of the world is focused on the recession, inflation, interest rates going up, crypto prices dropping, and other news (Terra/Luna, Celcius, Voyager, and hacks), Mastercard and a few other big companies are preparing.
In the past few months, we saw BlackRock enter the market and partner with Coinbase. We saw Fidelity and Citadel Securities launch a crypto exchange. We saw BNY Mellon and Nasdaq launch their crypto custody services. We saw Visa expand its partnership with FTX and Google announce it will accept crypto payments for its cloud services. Credit card companies, banks, stock exchanges, payment companies, and other financial institutions will offer crypto.
It should come as no surprise, that these folks are capitulating. They know what’s on the horizon and they know that now is the time to get ready for crypto’s mass adoption. While they fought crypto for years calling it a bubble, now they know the time has come to jump in and take a strong position.
From the outside looking in, crypto can sound pretty scary, People hear about the hacks, and maybe they know people that got scammed or lost money and that regulation is still a gray area. With banks getting in, you can expect a white glove service with ease of access.
Everyone will feel a lot safer buying their first bitcoin.
by Ilias Louis Hatzis is the founder and CEO of Kryptonio wallet.
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