Visa and Mastercard halt new crypto partnerships amid regulatory uncertainty

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(Kitco News) – Visa and Mastercard, two of the biggest names in payment processing, have both announced that they are taking a break from forming new crypto-related partnerships amid the crypto industry’s recent struggles, which include several high-profile bankruptcies.

According to a Reuters report, the 2022 crypto market downturn that led to the collapse of decentralized financial platform Terra, cryptocurrency exchange FTX and crypto lenders BlockFi, Celsius, Voyager and Genesis rattled investors and led to an increase in regulatory scrutiny of the sector.

For these reasons, Visa and Mastercard have chosen to delay the launch of certain crypto-related projects and services until market conditions and the regulatory environment improve.

“Recent high-profile failures in the crypto sector are an important reminder that we have a long way to go before crypto becomes part of mainstream payments and financial services,” said a Visa spokesperson, while also making sure to note that this does not change the company’s crypto strategy and focus.

Mastercard will likewise continue to focus on exploring and integrating blockchain capabilities into its infrastructure, while taking a break from establishing new partnerships. “Our efforts continue to focus on the underlying blockchain technology and how it can be used to help address current pain points and build more efficient systems,” a Mastercard spokesperson said.

According to Thomas Hayes, chairman and managing member of investment firm Great Hill Capital, this move by Visa and Mastercard is likely a response to the absence of a clear regulatory framework for crypto leading to a high level of uncertainty for industry participants.

“They cannot and should not move forward until there is a clear set of regulations,” Hayes said. “Delays cannot be attributed to their core business – as it remains strong. They are related to an uncertain regulatory environment for crypto and the demand/interest in crypto services declining in the short term.”

Payment processors have become more involved in blockchain technology in recent years amid a global push to reduce transaction fees. Visa and Mastercard have been two of the most active payment providers when it comes to blockchain integration and cooperation with crypto firms.

In October, Visa partnered with JPMorgan to streamline cross-border payments through the use of their private blockchain network Liink and B2B Connect. The service is now fully operational in ten countries and is expected to increase its presence to more than 30 countries by the end of 2023.

In December, it was revealed that a team of Visa researchers and engineers designed a smart contract application for a self-custodial wallet on the Ethereum blockchain that could enable programmable payment instructions such as automated bill payments via a bank account. And in February, cryptocurrency payments platform Wirex announced it had signed a long-term strategic global partnership with Visa as part of the firm’s aim to expand into the Asia Pacific (APAC) region and the UK

October was also a big month for Mastercard as the firm announced the launch of ‘Crypto Secure’, a new crypto service desk that addresses risk management and is designed to provide added security and trust to the digital ecosystem, and also unveiled ‘Crypto Source’, a new program which will enable financial institutions to begin offering secure crypto trading services to their clients through a partnership with stablecoin issuer Paxos.

The payment processor also announced a partnership with tier-two network Polygon in January to launch the Web3-based Mastercard Artist Accelerator program, designed to help artists from around the world with celebrity mentors and a dynamic fan base as they learn and create in Web3.