Mastercard against crypto fraud – The Cryptonomist

Mastercard has announced a new advanced tool to combat crypto fraud.

Mastercard fights crypto fraud with new tool

Mastercard has announced that next week it will launch an innovative new system to combat cryptocurrency fraud, which is also becoming increasingly common on its payment circuits. The new system, which will be called Crypto Secure, has the ability to visually assess the risk associated with a given transaction through artificial intelligence and data on the chain, allowing card issuers to decide on the necessary actions. 

The service will be built with the help of CipherTrace, a blockchain security startup acquired by Mastercard last year. This announcement goes in the direction imposed by many European and US government authorities who see the growing phenomenon of cryptocurrency fraud as a worryingly increasing danger.

As explained by CNBC, which was the first to break the news, Crypto Secure offers banks and card issuers the ability to use a dashboard that aims to visually detail whether or not a cryptocurrency-related activity is suspicious and to what extent. According to CNBC, the system will be officially unveiled next Tuesday.

CipherTrace is a cybersecurity company based in Menlo Park, California, that focuses precisely on tracking possible links between cryptocurrency transactions and criminal fraud. The company is also used by both businesses and government agencies, and allows them to be able to detect and investigate suspicious transactions involving cryptocurrency. 

The company was acquired by Mastercard in September 2021 with the clear intent of countering fraud.

Mastercard’s strategic acquisition

Ajay Bhalla, President, Cyber & Intelligence at Mastercard, when presenting that acquisition a year ago, said: 

“Digital assets have the potential to reimagine commerce, from everyday acts like paying and getting paid to transforming economies, making them more inclusive and efficient. With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”

CipherTrace’s innovative platform provides cryptocurrency cybersecurity solutions for some of the world’s largest banks, stock exchanges and other financial institutions through accurate data analytics, which with sophisticated algorithm processing help customers more securely and transparently execute their transactions on some 900 cryptocurrencies

Dave Jevans, CEO of CipherTrace, said recently:

“We help companies – whether they are banks or cryptocurrency exchanges, government regulators or law enforcement to keep the crypto economy safe.”

As explained by Mastercard’s senior management, this acquisition was part of Mastercard’s strategy to help provide customers, merchants, and businesses with more choice on how to move the value of their digital assets. 

It is one of many investments made by Mastercard in the crypto space, including partnerships with Uphold, Gemini, and BitPay to create cryptocurrency cards, the creation of new platforms to test and support central bank digital currencies, programs to support the wider use of blockchain and NFT technology, and the ability to support selected stablecoins directly on its network.

On the other hand, the phenomenon of cryptocurrency scams is growing steadily, as evidenced in a recent report by analytics firm Chainalysis, which recorded how cryptocurrency-related criminal fraud reached $14 billion in 2021.

The new dashboard provided to customers by Mastercard will allow them to recognize the degree of danger of a suspicious transaction, underscored by a different color gradient ranging from green for low risk to red for high risk.

Ajay Bhalla, reiterating that Mastercard already uses similar technology for fraud in fiat currency transactions, said:

“The idea is that the kind of trust we provide for digital commerce transactions, we want to be able to provide the same kind of trust to digital asset transactions for consumers, banks and merchants.”

Now with this new system, Mastercard also wants to ensure security in the world of cryptocurrencies, which, as he said in an interview with CNBC, is gaining prominence in the world of payments and finance:

“The whole digital asset market is now a pretty large, substantial market.”

Growing importance of crypto and blockchain in traditional markets

It is now well established that more and more traditional financial institutions are adopting cryptocurrencies as forms of investment and payment, starting with US giants Goldman Sachs, Merrill Lynch and JP Morgan. A few days ago, Nasdaq announced that it is ready to launch a new custodial service for crypto.

And it is precisely for this reason that European and American authorities, above all, are working hard to arrive in a short time at the approval of the regulation of the sector that operators and users have been waiting for too long. A regulation that could also help precisely to limit the phenomenon of fraud and scams. 

Just in these hours Biden has again called on Congress to meet to approve regulation for the cryptocurrency sector, still reeling from the Terra fiasco last May.

Mastercard has long been one of the companies most observant of the cryptocurrency market, considering that it had also been part of the small number of companies that had joined Facebook’s cryptocurrency project Libra which was later abandoned, and does not seem to be too concerned about the large declines seen in the market in 2022. 

Bhalla said: 

“These are market cycles, they will come and they will go. I think you’ve got to take the longer view that this is a big marketplace now and evolving and is probably going to be much, much bigger in the future.”

In part because while it is true that the prices of the major cryptocurrencies have more than halved in value, the adoption of digital currencies doesn’t seem to be declining, and consequently fraud and scams related to their use are also growing.