Visa, Mastercard are taking crypto. So what’s next? - opinion
While Visa and Mastercard’s latest developments are monumental, they were not the first to offer crypto.
By ARIEL SHAPIRAUpdated: APRIL 25, 2021 21:45MICROSOFT DEVELOPMENT center in Herzliya Pituah, home to many hi-tech companies(photo credit: GILI YAARI/FLASH90)
Visa and Mastercard are accepting crypto payments. Here’s what it means for crypto’s future.As the saying goes, if you can’t beat ‘em, join ‘em – and that is exactly what Mastercard and Visa did as they recently started supporting digital currency transactions on their networks. This is a huge step forward in the crypto realm, coming from the two largest payment networks in the US.Visa and Mastercard respectively have over 336M and 231M active cardholders in the US, and 3.5B and 966M worldwide. They process transactions in over 210 countries and territories in more than 150 currencies. Embracing cryptocurrencies for everyday payments is a huge step forward in crypto’s quest for mass adoption, as these titans represent billions of payments carried out worldwide every year.While Visa and Mastercard’s latest developments are monumental, they were not the first to offer crypto. Several payments companies, notably Square and PayPal, previously made headlines for accepting cryptocurrency payments. In the case of the latter, customers in the US can use crypto in their PayPal wallet as a funding source at checkout, converting their crypto holdings to fiat currency to complete transactions. This was done in an effort to catalyze crypto retail payments.In hindsight, it might seem inevitable that Visa and Mastercard would follow their lead. But hindsight is 2020, especially when your lens is coated with former crypto skeptics on Wall Street embracing digital assets, and bitcoin’s price hovering over $55,000. Together, these efforts are the tipping point in the market acceptance of crypto.Visa’s acceptance of crypto (specifically Ethereum) served as a major milestone for the 62-year-old company. The move was done in response to the rise of crypto businesses, with the goal of eliminating the hassle of customers having to convert their cryptocurrency holdings into fiat currency, such as US dollars, before settling up their accounts on the Visa network.Mastercard decided to take the leap after noticing trends that indicated that a significant portion of their cards were being used to buy crypto assets, and crypto cards were being used to access the assets and convert them to traditional currencies for spending.Stablecoins are naturally the primary beneficiaries of Mastercard’s integration, and the change will allow many merchants to accept crypto, and let consumers and merchants avoid having to convert back and forth between crypto and fiat to make purchases.Who’s next? As part of the next step in the evolution of crypto, more banks and investors would need to get on board the crypto train. At the end of the day, crypto investors are the foundation of its growth. A quarter of US investors already own crypto, according to a February Piplsay survey, and over half believe it is a safe investment. While retail investors drove the 2017 bull run, institutions have a major role in the current one. Their involvement will only continue to grow as crypto matures.Invictus Capital, which offers dollar-backed, blockchain-based investment funds, found in a recent survey that due to the rising popularity of cryptocurrencies, the modern crypto investor “values learning how to generate high returns on his investment more than the idealism of cutting out the middleman.” Pragmatic reasons for investing, rather than idealistic ones, often signal maturation.
Banks are beginning to realize that they can no longer afford to ignore digital assets, demonstrating interest, but with caution. Some banks that have already made strides in leveraging blockchain architecture, on-boarding crypto exchanges and institutional investors, including Silvergate Capital, Signature Bank, and JPMorgan Chase. The banks understand that cryptocurrencies have the potential to outperform conventional banking products while offering greater efficiency, less bureaucracy, and increased transparency.However, some financial service leaders remain skeptical due to the volatility and breaches that have been experienced by crypto exchanges. A brand new financial infrastructure powered by blockchain requires a reboot in security protocols, too. Banks can’t protect bitcoin or Ether the same way they protect gold reserves or US dollars, and many will need to prepare their security systems for the blockchain transition that is to come.As the market matures, blockchain security providers are emerging to service entire institutions, rather than just individuals doing self custody. GK8, for example, allows financial institutions to store and manage their digital assets beyond hackers’ reach. It provides banks and financial institutions with a self-managed solution that offers the same level of security they see with their non-digital assets. The company, which is already guarding more than $1b. worth of digital assets, has made headlines for having the only truly air-gapped vault that is 100% offline. No inputs come in from the blockchain, keeping digital assets, such as cryptocurrencies, out of reach for hackers. Naturally, the banks that are quickest to launch crypto custody gain the upper hand, and those that are in-the-know are competing over safeguarding digital currencies.In a nutshell, cryptocurrencies are cooler, safer, and more approachable than ever. The tide has finally turned for digital currencies, and it is closer to becoming mainstream now than ever before. At this point, those stymied by cryptos’ risks from the past end up missing opportunities for the future. The innovators who adopt cryptocurrencies sooner will be the ones to lead their respective industries.
