Cryptocurrency and Mastercard – What You Need to Know
Cryptocurrency. The term is ubiquitous these days. Whether you get daily Instagram alerts urging you to invest or have just seen the news announcing that Mastercard is planning on utilizing cryptocurrency, this subject is one of the hottest topics in the currency market today. Below, we touch on what cryptocurrency is, why it is a popular investment, how Mastercard is getting into the game, and how this affects you.
What is cryptocurrency?
Cryptocurrency is a type of currency that is linked to an online database rather than a bank as a means of verifying transactions. Rather than relying on the exchange of physical money, cryptocurrency payments exist only as digital entries (ownership records are stored in a ledger) to an online database that describe transactions. You have most likely heard of Bitcoin, as this was the first decentralized coin on the market. Since the release of Bitcoin, there have been various cryptocurrencies that have emerged, such as Ethereum, Dogecoin (Elon Musk’s brainchild) and Theta.
Why is cryptocurrency such a popular investment?
Cryptocurrency has been popular with those looking for an investment that may hold up as a long-term store of value. The thought behind this is that because there is a limited supply of cryptocurrency, inflation is prevented. According to Investopedia, Bitcoin demonstrates some attributes of a currency, but its main source of value lies in its restricted supply and increasing demand. If Bitcoin gains scale and captures 15% of the global currency market (assuming all 21 million bitcoins in circulation), the total price per bitcoin would be roughly $514,000.
What changes is Mastercard making?
Mastercard will begin to support certain cryptocurrencies on their network, with the goal of creating choice for consumers. However, the company only plans on accepting currencies with regulations that meet their compliance measures. Mastercard feels that many of the newer coins in circulation need to tighten regulations, and thus will not be eligible for use on Mastercard’s network.
Additionally, Mastercard has teamed up with Wirex and BitPay to create crypto cards that allow people to use their cryptocurrencies for transactions. They have also joined up with LVL, a cryptocurrency exchange, to continue to build on their crypto collaborations.
You may be thinking, “Wow, now can I go buy my daily Starbucks with bitcoin?” Not so fast. Cryptocurrencies still don’t move through the Mastercard network. Their crypto partners convert the digital assets to traditional currencies, and then transmit them through the Mastercard network. However, Mastercard’s new developments will allow many more merchants to accept crypto, which is currently limited by proprietary methods unique to each type of coin. This change will also prevent consumers and merchants from having to convert back and forth between crypto and traditional currencies to buy that latte.
What does this mean for merchants and consumers?
There are only around 2,300 U.S. businesses that accept bitcoin, and about 13 major national companies accept bitcoin payments. These include Overstock, Microsoft, AT&T and Wikipedia, according to Currency Exchange International, a payments services provider in North America. According to a Bakkt press release, (the platform that is partnering with Mastercard) these new capabilities allow consumers to complete multiple types of conversions, from select loyalty points to cash, to redeeming airline miles toward a new laptop. According to USA Today, Mastercard’s crypto integration would change thousands of participating businesses, while providing increased flexibility for millions of merchants and users. However, it also introduces significant risk as the price of cryptocurrency is extremely volatile and could potentially cause businesses and consumers to lose vast amounts of value. What are your thoughts on Mastercard’s crypto integration? Is this the next big step for mankind, or a mistake in the making?
At 365 Glacier Payments we are dedicated to the education of merchants regarding business advancement and growth. If you have additional questions or need help setting up a merchant account, please schedule an appointment here. If you prefer, you can reach us at 866.857.8766 or email info@365glacierpayments.com.
