Mastercard to open merchant network to cryptocurrencies in 2021

Cafe working by coffee machine holding a tablet reading "Bitcoin accepted here".

Mastercard has pledged to enable direct cryptocurrency merchant transactions through its network later this year.

This means Mastercard customers holding the digital assets will be able to pay merchants that accept crypto directly in select cryptocurrencies. 

It marks an evolution in the way cryptocurrencies have been used by this major player to facilitate transactions. This historically involved partner crypto wallet firms, like Wirex and BitPay, converting the digital assets to fiat money (currency with government backing) before it landed in merchant accounts. 

Raj Dhamodharan, Mastercard’s head of digital asset products and partnerships, released a statement this week outlining the reasons behind the move and the approach to choosing the cryptocurrencies that would be accepted by the payment giant.

“Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want. It should be your choice, it’s your money,” Dhamodharan said.

Rather than naming likely crypto contenders the platform will use, Dhamodharan pointed to the need for security and regulation, with many cryptocurrencies not fitting Mastercard's standards for blockchain partnerships. He did however mention the viability of ‘stablecoins’, which are a type of crypto often linked in value to another asset such as a major national currency like the US dollar.

Consumer privacy, strict compliance protocols undermining illegal activity, and abiding by laws and regulations in operator countries were all cited as central to the selection process. 

Dhamodharan also highlighted the issue of value and stability in these often volatile and sentiment-based currencies.

“People will want to use these digital assets for payments, so that is one of our criteria. To reach our network, crypto assets will need to offer the stability people need in a vehicle for spending, not investment,” he said.

Crypto as a ‘store of value’ and Bitcoin’s latest price hike

Mastercard’s move to make crypto transactions commonplace begs the question of how people actually use cryptocurrencies. Within this conversation, the Bitcoin price boom can’t be ignored.

While the original intention of this decentralised currency was to operate digitally, beyond traditional financial institutions, the last decade of consumer and institutional interest in crypto has brought Bitcoin and other cryptocurrencies onto the investment landscape.

As major investment banks started including digital assets in their portfolios alongside at-home crypto traders, prices skyrocketed. 

Just this week Bitcoin shot up over USD$48,000 (more than a 20% increase in 24 hours) after Tesla announced it had bought USD$1.5 billion in Bitcoin.

While Tesla chief executive Elon Musk muses over drivers buying Teslas in cryptocurrency, the trend of crypto – particularly Bitcoin – standing as a store of value could impact its transactional use.

A ‘store of value’ is traditionally something like gold, which has a value that is broadly seen as sitting outside economic shifts. In times of uncertainty, investors may turn to this asset class which holds value and is considered lower risk.

While crypto prices fluctuate monumentally, the general long-term upward trend in value of the major players may cast cryptocurrency in this light for potential investors.

If you want to learn the Bitcoin basics, check out Mozo’s cryptocurrency explainer. Then head to our online share trading hub for a broader look at investment options.