Mastercard brings crypto trading to your bank

Important takeaways

• Mastercard is launching a program to enable regular banks to offer crypto trading to their customers
• The deal will see them act as an intermediary between the banks and crypto platform Paxos
• It is expected to drive adoption of crypto to investors who are not ready to jump to startups like Coinbase and Crypto.com

In a move that mirrors the recent partnership between Google and Coinbase, Mastercard is set to offer itself as an intermediary to allow high street banks to offer cryptocurrency trading to their customers.

The program will see them act as an intermediary for banks and crypto trading platform Paxos. The scheme is the same that allows users to trade crypto via PayPal, which also uses Paxos to facilitate the trades themselves.

It’s a big step to increase the usage base of crypto, with many potential investors wary of handing over their money to newer brands like Coinbase, Gemini or Kraken.

While many of these companies have received billions in venture capital funding and boast big names on their boards, they can’t compete with the track records of banks like Wells Fargo or JPMorgan Chase.

If crypto is to become fully mainstream, it becomes obvious that mainstream actors are going to be involved. It is somewhat ironic given that the invention of Bitcoin was to enable transactions to be completed without the need for a trusted third party.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we add another $100 to your account.

How will Mastercard facilitate crypto trading

Mastercard’s new service will enable banks to offer crypto trading services without actually executing the transactions themselves. The most important part of this relationship for the banks is that it will allow them to outsource compliance and record keeping for the crypto side of the business.

This is an area full of regulatory challenges and one that large, risk-averse financial institutions are keen to avoid.

In practice, the program can work by individuals making a transaction through the bank’s app or platform, which is then routed through Mastercard and completed via Paxos. How this is implemented will vary between banks, with some likely to offer consolidated functionality through their existing apps and others keeping crypto separate from customers’ main financial holdings.

For banks, it allows them to expand their service offering, which can help attract and retain customers. The more products and services a customer has with a single financial institution, the less likely they are to move elsewhere.

As you would expect, Mastercard and Paxos will collect a commission for providing the service, although full details of this have not been released.

So far, Mastercard has not published the names of the banks that have signed up for the program, but they have stated that it will start with a pilot program in Q1 2023. The expectation is that after this time the offer will be rolled out nationally and potentially globally.

The benefit for individuals

Crypto has continued to become more mainstream, but in many ways it still involves a leap of faith.

Despite spending billions of dollars on advertising that has included celebrities such as Matt Damon and Kim Kardashian, naming rights to the stadiums of the LA Lakers, Miami Heat, LA Chargers and LA Rams, Super Bowl commercials and countless other deals, the companies in cutting edge has yet to build the same level of trust as the mainstream financial system.

After all, they are up against banks like Wells Fargo which was founded in 1852, JPMorgan which dates back to 1871 and Goldman Sachs which dates back to 1869.

There is a lot of history to catch up on.

A deal with the likes of Mastercard would allow banks like these to offer crypto trading services to customers who would be unlikely to consider investing otherwise. Customers trust these financial institutions and will therefore be more likely to hand over their hard-earned money, in the expectation that they will not be defrauded by an outright scam.

That said, it’s not going to hide from the volatility that crypto can experience. The sector is in the midst of a crypto winter, with prices falling dramatically after a significant bull run through the pandemic years.

So far this year, Bitcoin is down over 50%, Ethereum is down almost 60% and many other digital currencies have fared even worse.

The pros and cons of a trusted third party

Bitcoin was the first real cryptocurrency and it was created on the basis of being able to carry out transactions without the need for a trusted third party. Until then, sending money or assets to someone else required an intermediary to confirm the transaction.

If you wanted to send money to a friend, you would instruct your bank, which then checked that you had enough funds to send to your friend’s bank, which then verified that the account existed and then deposited the money.

In many cases, especially in the developed world, there have not necessarily been any serious problems with this system.

However, it relies on trusting the bank in the middle. In many countries around the world, the financial system is not necessarily as secure or robust, and this can lead to problems such as a run on the banks.

Other problems such as corrupt governments or hyperinflation can also have devastating effects on a person’s wealth and can give them a reason to want to keep money and assets outside the mainstream financial system.

Even for people who don’t have to deal with these issues, some people just believe in being able to conduct their financial affairs in privacy without a bank or government tracking what they’re doing.

That’s all well and good for individuals who have a specific reason to need a decentralized way to spend money, but many people don’t. For the majority, cryptocurrency is simply another asset to invest in, potentially making gains and improving their financial standing.

For these people, having a trusted third party is a good thing. It gives them a helpline they can call if they have a problem, an account that shows all their assets in one place and the ability to hold their wealth without having to memorize a 12-word seed phrase or carry around thousands of dollars of Bitcoin on a USB stick.

The smart way to invest in crypto

For investors looking to access crypto right now, it’s a risky game. During a crypto bull run, almost everything goes up, and goes up fast. When winter comes, it can be a total guessing game as to which currencies are going to last until the next bull run and which are going to die completely.

You don’t have to look far to find crypto investments like Terra Luna, Celsius and Voyager Digital to see how quickly investments in the space can go pear-shaped.

But any time you’re looking to buy into an investment property, it’s a good long-term bet to get in when the price is down. It is an enigma.

Fortunately, we’ve created our AI Powered Crypto Kit to take the guesswork out of investing in crypto. This set invests in a diversified mix of cryptocurrencies through a number of digital currency trusts.

These invest in the big names such as Bitcoin and Ethereum, while gaining exposure to smaller values ​​that may include currencies such as Cardano, Litecoin, Solana and Chainlink. This is automatically rebalanced every week by our AI, to provide the best opportunity for risk-adjusted returns.

That doesn’t mean it’s not high risk, but it takes the day-to-day management of the portfolio out of your hands and into the hands of our sophisticated AI and machine learning algorithms.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we add another $100 to your account.