Mastercard announced it would be preparing for adoption of CBDCs and work as a payment processor once they come into existence.
Mastercard increasingly optimistic on the future of digital currencies
In the face of an increasing number of governments considering central bank digital currencies (CBDCs), and some like Nigeria already at the implementation stage, it’s not surprising that Visa and Mastercard are positioning themselves for the future of digital payments. Visa recently released its first smart contract that would be interoperable with CBDCs, and Mastercard plans to follow in its footsteps.
Michael Miebach, CEO of Mastercard, is firmly optimistic on the future of cryptocurrencies. His company has seen a significant increase in partnerships with crypto firms and growing volume from clients buying cryptocurrencies with Mastercards. During an earnings call with investors and stakeholders, he said that the most likely chance for digital currencies to work for payments would be if they were issued as CBDCs. He continued that Mastercard would make its network ready to serve as a settlement layer, once governments start deploying CBDCs. He remained confident that Mastercard would be able to provide a safe space for governments and the private sector to figure out how CBDCs would work in practice.
With governments starting to prepare CBDCs, Mastercard prepares the infrastructure
Mastercard has been the third-biggest payment processor across the globe in 2020. According to Statistica, its 113 billion transactions only lagged Visa’s 188 billion and UnionPay’s 151 billion. Small wonder that Mastercard would like to keep a cozy relationship with public servants, who have been increasingly eager to move forward with CBDCs. The Bahamas became the first country in the world to issue a CBDC on October 21, naming it the “Sand Dollar.”
While countries like the U.S. are seemingly still a bit away from introducing CBDCs, Mastercard is wasting no time getting prepared for all eventualities. Last week, the company announced its partnership with cryptocurrency marketplace Bakkt, enabling U.S. customers to trade crypto. It has also worked on acquiring blockchain analytics firm CipherTrace to track illicit transactions across different cryptocurrencies.
Mastercard on standby, but will not push the agenda
Still, CEO Miebach has made it clear that his company would not be pushing for early adoption of any kind of digital currencies, despite recently launching crypto-payment cards in the Asia-pacific region. He also raised the question of the exact use case of CBDCs and what kind of utility they would have over regular cash. As citizens might not be as eager as companies to adopt them, privacy concerns could lead them to use private-sector stablecoins, like USDC and USDT already in circulation. Miesbach stated that Mastercard would be open to cooperation with anyone but would stick to its principles when doing so.
Considering the rapid expansion of the cryptocurrency market and the ballooning market capitalization of stablecoins, everyday use is a matter of “when,” not “if.” Still, governements and payment processors alike are watching their evolution with eagle eyes, hoping that possible fallout from the increasing frenzy doesn’t spill over into the real economy.