Mastercard is building a bridge between crypto and banks
Finally, crypto news you can understand.
The free newsletter for people who are interested in crypto but not, you know, in crypto.
Mastercard crashed the crypto party this week when it announced a program to help financial institutions offer crypto trading. It’s the latest push by payment processors to bring traditional, “centralized” financial giants into the crypto space — and for blockchain fundamentalists, they’re unwelcome guests.
- Visa teamed up with crypto exchange FTX last week to roll out crypto debit cards in 40 countries, while American Express has planned a move to “stablecoins,” a type of crypto pegged to traditional fiat currency prices.
This major banking invasion is a vibe-killer for crypto enthusiasts who want to keep the space as “decentralized” as possible. Operating independently of centralized institutions – including banks that handle transactions – is literal in many definitions of both “cryptocurrency” and “blockchain”. And an entire subsector has emerged to champion this ideal vision, called decentralized finance (DeFi).
In fact, bitcoin, the first cryptocurrency, was created in response to the mass failure of banks during the financial crisis of 2008. Its original purpose was to facilitate internet transactions without involving banks or other financial intermediaries.
That’s all to say that using a crypto-laden Visa to shop the Reformation sale online is like eating soup with a lollipop. It sure works, but it’s a little weird.
Then there is the ice cream soup of arguments
Skeptics argue that the fully decentralized dream is about as realistic as good-tasting candy corn (not @ me), and that involving major financial institutions is the key to crypto becoming Ed Sheeran-level mainstream.
These TradFi (traditional finance) believers have been bullish over the past year, as crypto’s version of a recession, a “crypto winter,” has set in. Prices of major cryptocurrencies are well down from their 2021 peaks, while high-profile crypto companies have laid off workers, filed for bankruptcy, and simply collapsed. “This volatility is what will make consumers feel safer with established financial institutions,” Melody Brue, a fintech analyst at Moor Insights & Strategy, told Protocol.
Looking forward…not all financial institutions are keen on cryptocurrencies. (JPMorgan Chase CEO Jamie Dimon called them “decentralized Ponzis” last week.) If banks decide to take advantage of Mastercard’s crypto integrations, they’ll go head-to-head with crypto exchanges like Coinbase.—JW
