Crypto: USD Coin coming soon to Mastercard

Thanks to a crypto partnership with Immersve, Mastercard is actually launching USD Coin (USDC) payments.

USDC is the world’s second-largest stablecoin by market capitalization, and Immersve is working on a payment card for the metaverse.

Its website states that Immersve is a leading member of the Mastercard network, and its platform supports both centralized and decentralized payment experiences.

In fact, both exchanges and dApps, such as Web3 wallets and DeFi protocols, can integrate with Immersve’s APIs and smart contracts to transact anywhere Mastercard is accepted. Immersve is also in effect a registered financial service provider.

The service is not yet active, but will be during 2023, and provides for users to apply for their own usable card on the Mastercard network.

It is billed as “the most decentralized card in the world,” and allows users to pay directly from the Web3 wallet on the Mastercard circuit.

The crypto partnership that brings USD Coin to Mastercard

The partnership between Mastercard and Immersve will thus use decentralized protocols to settle cryptocurrency transactions in real time at points of sale that accept payments via Mastercard online.

This will make it possible to make crypto payments both in digital worlds and in the physical world, as well as in the metaverse.

Payments will be made directly in USD Coin (USDC). Once the user sends USDC, the tokens will be converted into regular USD fiat to complete the payment on the classic Mastercard network.

This will allow users to use their existing Web3 wallets to make direct cryptocurrency payments without having to involve third parties, because the payment will be made directly on the Mastercard network with automatic conversion to fiat currency.

The use of USDC convertible to USD makes the system relatively simple, but it is not yet clear whether it will be possible to convert to other fiat currencies as well. In fact, this may complicate the process somewhat.

It is also unclear whether crypto payments will be able to be made only in USDC, not least because in the case of using real cryptocurrencies there would always be the hurdle of selling them with associated fees.

In the specific case of the partnership between Mastercard and Immersve, the latter will work with a third-party settlement service provider that will do the actual conversion of USDC to USD, so that the actual payment can then be made in fiat currency on the Mastercard network.

The interesting thing is that in this way users will in fact be able to use their own private keys to make these types of payments, since they will be able to use their existing crypto wallet.

Immersve CEO Jerome Faury commented, saying:

“Collaborating with a well-known and trusted brand like Mastercard is a big step towards mainstream adoption of Web3 wallets.”

The current situation

To date, it is not possible to make direct fiat currency payments from one’s non-custodial crypto wallet.

In fact, it is always necessary to go through a crypto exchange with fiat currency, which is then moved to a debit card.

In other words, the partnership between Mastercard and Immersve will allow the user to skip a couple of steps, because both the conversion from crypto to fiat and the moving of dollars to the card will be handled automatically by the system.

In this way, the user will simply make the payment in USDC, and everything else will be done by Immersve and Mastercard’s infrastructure, which will automatically exchange USDC to USD, and send USD to the payment recipient.

Currently there are already several other solutions for being able to pay in cryptocurrencies on the Mastercard or Visa network, particularly those offered by exchanges. However, they involve the user having to sell the cryptocurrencies in order to cash in fiat currency that can then be moved to the debit card.

Moreover, non-custodial wallets are anonymous, while debit cards are not. However, it is unclear whether Immersve’s service will be as anonymous as non-custodial wallets, but since Mastercard is involved it is unlikely to be.

The solution to be able to anonymously handle crypto to fiat conversions of small amounts is to use cryptocurrencies to anonymously purchase gift cards containing fiat currency credit.

Indeed, if such gift cards are then spent in physical stores, the name of the person using them is never requested. If, on the other hand, they are used on accounts on ecommerce sites, these are generally not anonymous, but at least the source of the funds with which they were purchased is not visible to ecommerce operators.

Mastercard and crypto: a new era with USD Coin

Mastercard has already been operating in the crypto sector for some time, but until now it had only offered itself as a manager for fiat currency transactions.

Indeed, even the partnership with Immersve envisages this as Mastercard’s role, although this time there seems to be more to it.

In fact, Mastercard does not enter into direct partnerships with companies that deal with non-custodial wallets. All the non-custodial wallets that can be used to power Mastercard debit cards to date do not involve a direct partnership with Mastercard, but through intermediaries.

Direct partnerships are those with companies that do KYC and comply with all regulations, and since Immersve is a registered financial services provider it is possible that this time the partnership will be direct.

Despite this, a third service provider will be involved, who will handle the exchange of USDC into USD.

This is why Immersve’s card is called “the most decentralized card in the world,” since it allows direct payment in USDC from non-custodial wallets to the Mastercard network, although this step is actually handled by two intermediaries.

The USDC/USD exchange rate

Typically exchanges of USDC to USD take place on exchanges, and are in effect sales of USDC for USD.

However, in theory one could directly engage Circle, i.e., the issuer of USDC, to make direct trades.

In fact, when Circle withdraws USDC from the market, it does so by giving USD in exchange at par to those who choose to return USDC tokens to it.

In the case of Immersve and Mastercard, it appears that the conversion is done by a simple market sale through an intermediary, but in the future it is not impossible to imagine that Circle may be directly involved in order to make the exchange not by a sale but by a redemption of the tokens.

The difference is that Circle always returns USD at par, whereas sometimes on crypto markets the price of USDC may be slightly below, or above, $1.

However, it is not a coincidence that Immersve chose USDC for this project, because out of all the USD collateralized stablecoins, it is definitely the most regulated to date.