Mastercard: Cryptocurrencies and CBDCs are the future of money
* Mastercard noted that adoption rates for emerging payment options such as cryptocurrencies
have historically been higher in Asia.
* Consumers in Thailand and India are more accustomed to using cryptocurrencies than
those in a highly developed market such as Australia.
* With nearly every central bank exploring or testing CBDC, Mastercard remains optimistic
about its widespread adoption sooner rather than later.
Whatever your position on cryptocurrencies, the fact remains that these digital assets
are gradually establishing a foothold in the world of payments.
Simply put, cash will not always reign supreme, and that is a belief shared by Mastercard,
a global payments leader.
Indeed, Mastercard has begun offering its customers access to cryptocurrency-linked
debit, credit, and digital wallets, as well as loyalty rewards programmes powered by cryptocurrency.
Earlier this month, the multinational financial services corporation based in the United States
partnered with three leading cryptocurrency service providers in Asia Pacific to launch
the region's first crypto-funded Mastercard payment cards.
The digital asset service providers — Hong Kong's Amber Group, Bitkub in Thailand, and
CoinJar in Australia — have all begun accepting applications for crypto-linked Mastercard
credit, debit, or prepaid cards in their respective markets within the region.
They will then be able to instantly convert their cryptocurrencies to traditional fiat
currency using these cards.
In an interview with Tech Wire Asia (TWA), Rama Sridhar, executive vice president, digital
& emerging partnerships and new payment flows, Mastercard Asia Pacific, discussed the company's
strategy in the digital assets space, focusing on cryptocurrencies and central bank digital
currencies (CBDCs).
Mastercard was the first to enter the western market with cryptocurrency products and services.
How has acceptance been so far, and how do you anticipate it will be in the Asia Pacific
markets?
Globally, the Asian region has always had a higher rate of adoption of emerging payment
options.
There are, however, a few reasons why Asia is the world leader in this regard.
To begin, according to Mastercard's New Payments Index, 94 percent of consumers in the Asia
Pacific region are considering using emerging payment methods this year.
According to Mastercard, emerging payment methods include QR codes, digital wallets,
buy-now-pay-later (BNPL) transactions, cryptocurrencies, and biometric authentication.
Having said that, the desire and enthusiasm for adopting a new payment method is extremely
strong in this part of the world.
The second factor is a sizable Asian population that operates completely cross-border, whether
through online purchases or physical travel.
As a result, expectations for a more global, seamless, and interoperable framework are
higher in Asia than in the majority of developed Western economies.
Right.
Which country in the Asia Pacific region does Mastercard consider to be the most cryptocurrency-accepting?
In comparison to a highly developed market like Australia, there are more consumers in
Thailand and India who are very comfortable using cryptocurrencies.
Even Vietnam and Indonesia are growing at double-digit rates at the moment, which bodes
well for emerging payment methods.
This in and of itself speaks volumes about Asia's developing economies, where the cash
runway is extremely long.
Not to mention the fact that, according to the United Nations, over 60% of the world's
youth live in Asia-Pacific, totalling over 750 million young women and men aged 15 to
24 years.
Now, as cryptocurrency matures over the next three to four years, many of these play people
will be adults or will have begun their careers.
In summary, Asia Pacific is demographically primed for higher adoption rates, which is
probably the most accurate assessment.
As nearly 30% of the global value of crypto transactions occurs in Asia, the region is
destined to be the global leader when it comes to the future of money.
What was the tipping point at which Mastercard decided to incorporate cryptocurrencies into
its payment network?
Mastercard's position on cryptocurrencies is fairly straightforward: it is a matter
of choice.
We are not recommending that you begin using cryptocurrencies.
However, we are here to enable customers, merchants, and businesses to move digital
value in any way they choose – traditional or crypto.
It should be your decision; after all, it is your money.
Within the Mastercard network, we observed a significant increase in the number of people
using cards to purchase crypto assets, particularly during Bitcoin's recent price surge.
Additionally, we are seeing an increase in users using crypto cards to gain access to
these assets and convert them to traditional currencies for spending.
Above all, we have been and will continue to be extremely selective about the assets
we support, guided by our digital currency principles, which prioritise consumer protection
and compliance.
Currently, we have partnerships with over 30 crypto card programmes, and to be clear,
not all of today's cryptocurrencies are supported on our network and will be in the future.
However, stablecoins, which are backed by a basket of fiat currencies or a single fiat
currency, are gaining significant acceptance.
To top it off, stablecoins are more regulated and reliable than they have been in the recent
past, and it is these very stablecoins that we intend to integrate into our network.
Tell us more about your thoughts on CBDC and the "safe space" that Mastercard provides
for governments and private sector banks to work out how they work.
We announced this proprietary testing platform for central banks last year.
It essentially allows central banks to engage in a simulated environment where they can
issue currency and distribute it among banks, financial institutions, and consumers in order
to fathom how it would work in the real world.
This will enable banks to identify and strategise the optimal regulatory environment in which
to launch central bank digital currencies (CBDCs).
To be honest, almost every central bank is investigating CDBC today, not because they
want to issue it immediately, but because it is proving to be a necessary component
of the ecosystem.
With that in mind, developing the framework, the rules, and determining the most effective
method is simply a matter of time.
And for Mastercard, anything the central bank does on a principled basis will automatically
be assumed.
That is how our collaborations progress.
Central banks in all developing economies, and particularly in Asia, are focusing their
efforts on going cashless.
As a result, many central bankers believe that CBDCs have the potential to significantly
increase the number of people who use the digital financial system.
Transparency is the other real issue on central banks' agendas.
As a result, all governments and regulators are moving in this direction.
Yes, this is not the only way to do it, but it is a good way to do it because it enables
rapid access to currency for populations where physical cash circulation is restricted.
Do you believe that a CBDC future will arrive sooner rather than later?
CBDCs are the way forwards to facilitate digital transformation, financial and digital inclusion,
and the elimination of cash.
Will it occur within the next two or five years?
Unfortunately, I cannot predict, but I believe that a great deal of framework and work is
required.
Without a doubt, there will be numerous debates between central banks about the virtues and
demerits of how things should be managed.
They will need to ensure that other established payment ecosystems coexist peacefully with
CBDCs.
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