Banks & merchants in Mastercard's Network to Provide Crypto Services

Mastercard plans for banks and merchants on its payments network to incorporate cryptocurrency into their debit & credit cards. This change would also allow virtual assets such as hotel points or airlines loyalty programs to be converted into Bitcoin or NFTs.

To achieve this, the payments network is collaborating with Bakkt, the cryptocurrency company that recently became a subsidiary of Intercontinental Exchange. Bakkt will facilitate custodial services for users who sign up.

Mastercard's executive vice president of digital partnerships Sherri Haymond said in an interview that the company plans to provide all of their partners the ability to easily add crypto services to whatever it is they're doing.

Sherri said,

"Our partners, be they banks, fintechs, or merchants, can offer their customers the ability to buy, sell and hold cryptocurrency through an integration with the Baktt platform."

The statement could influence a remarkable expansion concerning how regular Americans earn and use bitcoin and other cryptos. Mastercard operates one of the most renowned international payments networks alongside Visa and has partnerships with over 20,000 financial institutions globally. According to the company, currently, there are approximately 2.8 billion Mastercards in use.

Many investors have shown interest in bitcoin since it skyrocketed this year to hit a high record price of more than $60,000 this month. U.S. regulators have licensed the fund industry to provide the first bitcoin-linked ETF this month, while mega institutional investors including bond giant Pimco have expressed interest to consider trading crypto.

According to Sherri, that interest has influenced Mastercard customers to request the network for assistance in providing cryptocurrency services. That way, banks can keep clients on their own networks instead of allowing dollars to migrate to cryptocurrency exchanges, she added.

Shares of Bakkt, which started trading as a public firm public last week, jumped above 70% on the news. Mastercard in partnership with Bakkt were set to state their collaboration later Monday during the annual Money 20/20 conference in Las Vegas, Nevada.

According to Bakkt CEO Gavin Michael, apart from providing cryptocurrency wallets and credit cards for financial institutions, the collaboration implies that even restaurants and merchants can start to provide rewards in BTC rather than traditional points. Existing points can be changed into cryptocurrency at rates set by the involved companies, allowing clients to earn a yield, Gavin said.

Michael announced in an interview "We're lowering the barriers to entry, allowing people to take something like your rewards points and trade them into crypto." He also said, "It's an easy way to get going because you're not using cash, you're putting something that's an idle asset sitting on your balance sheet, and we're allowing you to put it into work."

Following the impressive success of ProShares BTC Strategy ETF (ticker BITO, the stakes are at an all-time high for the queue of issuers anticipating to gain a foothold in the crypto market.

Update APril 13th, 2022

Nexo and Mastercard unveil the first crypto-backed payment card

Nexo said Wednesday it has partnered with Mastercard to introduce the world's first crypto-backed payment card.

With digital assets becoming more mainstream, crypto and incumbent networks have decided to join forces.

Nexo said the card, initially available in some European countries, allows users to purchase goods and services without having to sell physical assets such as Bitcoin, which are used as collateral.

In most traditional credit cards, the credit limit is fixed.

The card is linked to a crypto-backed credit line provided by Nexo and can be used at 92 million merchant locations where Mastercard is accepted. Investors will be able to spend up to 90% of the value of their crypto assets in fiat, the company said.

Nexo said, "The card requires no minimum repayments, monthly, or inactivity fees. There are no FX fees for up to 20,000 euros per month."

Customers can withdraw or spend as much as they like from the open credit line. Interest is only charged on the amount of credit used. For customers with a loan-to-value ratio of 20% or less, the interest rate stays at 0%.

As Mastercard's head of crypto and blockchain products and partnerships, Raj Dhamodharan said:

"digital assets are revolutionizing the financial landscape."

Nexo's cards are issued by DiPocket, an electronic money company.