Mastercard Is Bringing Crypto Trading To Your Bank

Key takeaways

• Mastercard is launching a program to enable mainstream banks to offer crypto trading to their customers
• The deal will see them act as a middleman between the banks and crypto platform Paxos
• It’s expected to drive adoption of crypto to investors who aren’t ready to jump ship to startups like Coinbase and Crypto.com

In a move that echoes the recent partnership between Google and Coinbase, Mastercard are going to be offering themselves up as a middleman to allow main street retail banks to offer cryptocurrency trading to their customers.

The program will see them act as a go-between for banks and crypto trading platform Paxos. The arrangement is the same one that allows users to trade crypto via PayPal, who also use Paxos to facilitate the actual trades.

It’s a major step to increasing the usage base for crypto, with many potential investors wary of handing over their cash to newer brands such as Coinbase, Gemini or Kraken.

While many of these companies have received billions in venture capital funding and boast big names on their board of directors, they can’t compete with the track record of banks like Wells Fargo or JPMorgan Chase.

If crypto is to become fully mainstream it’s becoming obvious that mainstream players are going to be involved. It’s somewhat ironic given that the invention of BitcoinBTC
was to enable transactions to be completed without the need for a trusted third party.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account. 

How will Mastercard facilitate crypto trading

Mastercard’s new service will allow banks to offer crypto trading services without having to actually complete the transactions themselves. The most important part of this relationship for the banks is that it will allow them to outsource the compliance and record keeping for the crypto side of the business.

This is an area that is rife with regulatory challenges and one that large, risk averse financial institutions are keen to avoid.

In practice the program could work by having individuals make a trade through their bank’s app or platform, which is then routed through Mastercard and completed via Paxos. How this is implemented will differ between banks, with some likely to offer consolidated functionality through their existing apps and others keeping crypto separate from their customers main financial holdings.

For banks it allows them to widen their service offerings which can help attract and retain customers. The more products and services a customer has with a single financial institution, the less likely they are to move somewhere else.

As you’d expect, Mastercard and Paxos will pick up a commission for providing the service, although full details of this have not been released.

So far Mastercard haven’t released the names of the banks who have signed up for the program, but they have stated that it will begin with a pilot program in Q1 2023. The expectation is that after this point, the offering will be rolled out nationally and potentially globally.

The benefit for individuals

Crypto has continued to become more mainstream, but in many ways it still involves a leap of faith.

Despite spending billions of dollars in advertising that has included celebrities like Matt Damon and Kim Kardashian, naming rights for the stadiums of the LA Lakers, Miami Heat, LA Chargers and LA Rams, Super Bowl commercials and countless other deals, the companies at the forefront haven’t yet built up the same level of trust as the mainstream financial system.

After all, they’re up against banks like Wells Fargo which was founded in 1852, JPMorgan which goes back to 1871 and Goldman Sachs from 1869.

That’s a lot of history to make up for.

A deal with the likes of Mastercard will allow banks like these to offer crypto trading services to customers who would be unlikely to consider investing otherwise. Customers trust these financial institutions and would therefore be more likely to hand over their hard earned cash, on the expectation that they won’t be fleeced by an outright scam.

With that said, there’s not going to be any hiding from the volatility that crypto can experience. The sector is in the midst of a crypto winter, with prices falling dramatically after a significant bull run throughout the pandemic years.

So far this year Bitcoin is down over 50%, Ethereum is down almost 60% and many other digital currencies have fared even worse.

The benefit and drawbacks of a trusted third party

Bitcoin was the first real crypto currency and it was created on the basis of being able to conduct transactions without the need for a trusted third party. Up until then, sending money or assets to anybody else required a middle man to verify the transaction.

If you wanted to send money to a friend, you would instruct your bank, who would then check you had sufficient funds to then send to your friends bank, who would then confirm that the account existed and then deposit the money.

In many cases, particularly in the developed world, there hasn’t necessarily been any serious problems with this system.

However, it relies on trusting the bank in the middle. In many countries around the world, the financial system isn’t necessarily as secure or robust and this can lead to problems such as a run on the banks.

Other issues such as corrupt governments or hyper-inflation can also have devastating effects on an individual’s wealth and can give them a reason to want to keep money and assets outside the mainstream financial system.

Even for people who don’t have to deal with these problems, some just believe in being able to conduct their financial business in privacy without a bank or a government being able to track what they’re doing.

That’s all well and good for individuals who have a specific reason to need a decentralized way to use money, but many people don’t. For the majority, cryptocurrency is simply another asset that can be invested in, to potentially make gains and improve their financial position.

For those people, having a trusted third party is a good thing. It gives them a helpline they can call if they have a problem, an account that shows all of their assets in one place and the ability to hold their wealth without needing to remember a 12 word seed phrase or carry around thousands of dollars worth of Bitcoin on a USB stick.

The smart way to invest in crypto

For investors who want to access crypto right now, it’s a risky game. During a crypto bull run, almost everything goes up, and goes up fast. When winter hits, it can be a total guessing game as to which currencies are going to last until the next bull run and which are going to die completely.

You don’t need to look far to find crypto investments like Terra Luna, Celsius and Voyager Digital to see how quickly investments in the space can go pear-shaped.

But whenever you’re looking to buy into any investment asset, getting in when the price is down is a good long term play. It’s a conundrum.

Luckily, to take the guesswork out of investing in crypto, we’ve created our AI-powered Crypto Kit. This kit invests in a diversified mix of cryptocurrencies through a number of digital currency trusts.

These invest in the big names like Bitcoin and Ethereum, while also gaining exposure to smaller caps that can include currencies such as Cardano, Litecoin, Solana and Chainlink. This is automatically rebalanced every week by our AI, to give the best opportunity for risk adjusted returns.

It doesn’t mean it’s not high risk, but it takes the day to day management of the portfolio out of your hands and into the hands of our sophisticated AI and machine learning algorithms.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account.