In a move reminiscent of Google’s recent partnership with Coinbase, Mastercard will act as a middleman to allow main street retail banks to offer cryptocurrency trading to their customers.
The programme will see them act as a middleman between banks and the cryptocurrency trading platform Paxos. The arrangement is the same one that allows users to trade cryptocurrency through PayPal, which also uses Paxos to facilitate trades.
It’s a significant step toward increasing crypto usage, as many potential investors are 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 have big names on their boards of directors, they cannot compete with banks like Wells Fargo or JPMorgan Chase.
If cryptocurrency is to become fully mainstream, it is clear that mainstream players will be involved. It’s ironic, given that the purpose of Bitcoin was to allow transactions to be completed without the use of a trusted third party.
How will Mastercard make cryptocurrency trading easier?
The new Mastercard service will enable banks to provide crypto trading services without having to complete the transactions themselves. The most important aspect of this relationship for banks is that it will allow them to outsource the crypto compliance and record keeping.
This is a highly regulated area that large, risk-averse financial institutions prefer to avoid.
In practise, the programme might involve users making a trade through the platform or app of their bank, which is then sent through Mastercard and finished by Paxos. Banks may handle this differently; some may give integrated capabilities through their current apps, while others may keep cryptocurrency separate from their customers’ primary financial holdings.
It enables banks to increase the range of services they offer, which can help them draw in and keep customers. A customer is less likely to switch financial institutions if they use more of their products and services there.
Mastercard and Paxos will receive a commission for offering the service, as would be expected, however specifics on this have not yet been made public.
The banks who have signed up for the scheme haven’t yet been disclosed by Mastercard, but they have said that a trial programme would start in Q1 2023. After this, it is anticipated that the offering will be made available nationwide and possibly even internationally.
The advantage for people
Although cryptocurrency has continued to gain popularity, many aspects of it still need a leap of faith.
The companies at the forefront haven’t yet attained the same level of trust as the traditional financial system, despite investing billions of dollars in advertising that has featured celebrities like Matt Damon and Kim Kardashian, naming rights for the LA Lakers, Miami Heat, LA Chargers, and LA Rams stadiums, Super Bowl commercials, and countless other deals.
They are competing with institutions like Wells Fargo, founded in 1852, JPMorgan, formed in 1871, and Goldman Sachs, founded in 1869.
That much history needs to be made up.
These banks will be able to offer cryptocurrency trading services to customers who would not otherwise consider investing thanks to a collaboration with companies like Mastercard. Customers are more ready to part with their hard-earned money since they trust these financial organizations and believe they won’t be defrauded by outright fraud.
Having said that, there will be no escaping the volatility that cryptocurrency can encounter. After a tremendous bull run throughout the preceding years, the industry is currently experiencing a crypto winter as prices have fallen sharply.
Bitcoin has lost more than 50% of its value this year, Ethereum has lost over 60%, and many other digital currencies have done even worse.
The advantages and disadvantages of a dependable third party
The idea behind the creation of the first true cryptocurrency, Bitcoin, was the ability to carry out transactions without the aid of a reliable third party. Up until that point, transferring assets or money to a third party required the use of a middleman to confirm the transaction.
If you wish to send money to a friend, you would tell your bank to do it. Your bank would then verify that you had enough money in your account before sending the money to your friend’s bank, which would then verify that the account existed and deposit it.
There haven’t always been significant issues with this system, especially in the industrialized world.
But it depends on believing the bank in the middle. The financial system may not be as stable or secure in many nations around the world, which might result in issues like a bank run.
A person may seek to retain money and assets outside the traditional financial system for a variety of reasons, including the destructive consequences that other problems such as corrupt governments or hyperinflation can have on their fortune.
Some people just believe that they should be free to do their financial business in private without worrying that a bank or the government will be able to monitor what they’re doing, even for those who don’t have to deal with these issues.
That’s great for people who have a special need for a decentralised method of using money, but many people don’t. The majority of people view cryptocurrencies as just another asset they may invest in with the hope of making money and strengthening their financial position.
Having a reliable third party on their side is advantageous for those people. It enables them to hold onto their wealth without having to carry around thousands of dollars’ worth of Bitcoin on a USB stick or remember a 12-word seed phrase. It also provides them with a helpline they can call in case of problems, an account that shows all of their assets in one location, and the ability to hold wealth.
How to invest wisely in cryptocurrencies
It’s a dangerous game for investors who want to get cryptocurrency right away. Almost everything increases quickly during a bull run in the cryptocurrency market. When winter arrives, predicting which currencies will survive until the next bull run and which will entirely collapse can be a pure guessing game.
It’s easy to uncover cryptocurrency investments like Terra Luna, Celsius, and Voyager Digital to demonstrate how quickly money invested in the field might lose value.
However, the best long-term investment strategy is to buy any financial asset when the price is low. It’s a riddle.
Fortunately, we’ve developed our AI-powered Crypto Kit to remove the uncertainty from investing in cryptocurrencies. Through a variety of cryptocurrency trusts, this kit invests in a diverse mix of cryptocurrencies.
These make investments in well-known coins like Bitcoin and Ethereum while also acquiring exposure to coins with lesser market capitalisation, like Cardano, Litecoin, Solana, and Chainlink. Our AI automatically rebalances this each week to provide the best chance for risk-adjusted returns.
It doesn’t mean it’s not high risk, but it puts our advanced AI and machine learning algorithms in charge of managing the portfolio on a day-to-day basis instead of you.
