With Mastercard’s unprecedented push for a patent pertaining to “fractional reserve” banking for crypto assets, the CEO of Visa has claimed that cryptocurrencies aren’t a pertinent threat to the stability of legacy of financial systems.
Erstwhile hedge fund manager Jim Cramer, hosting an interview with Al Kelly, on CNBC Mad Money, discussed the payment processor’s ambitions to enter the cryptosphere.
During the interview , Al Kelly pointed out how the firm inclined towards supporting digital currencies in the future at any point when the demand and adoption raises to the required as seen from them level.
Mr. Kelly believes that the currencies which Visa uses as base products are not threatened by the virtual coins as an asset class. Simultaneously, Visa will reply to the demand when crypto-adoption improves in the future.
Furthermore, Kelly was of the opinion that, if crypto assets somehow succeeds, he would be open to pushing Visa to “move in that direction,” as the multinational corporation intends to situate itself in the world’s leading financial mediums. Although, the traditionalist implied to the fact that he still isn’t affirmed on the idea of cryptocurrencies, expressing that this innovation remains a commodity in Visa’s eyes.
“I think there has to be some market that it becomes somewhat like a fiat currency in order for us to be comfortable. If it goes in that direction, we will move in that direction. We want to be in the middle, Jim, of every payment flow in the world regardless of how it happens or what the currency is behind it. So if we have to go there, we will go there. But right now, it’s more of a commodity than a payment vehicle.”
At the Center
Visa is the most dominant credit card service company in the finance sector and is amongst the most profitable businesses in the market alongside MasterCard.
Kelly prioritized that Visa will eventually serve as a middleman to attract crypto users to send and receive digital assets with Visa on its platforms, by providing fees to the company.
Nevertheless, by the time Visa would feel comfortable in integrating cryptocurrencies, which as the CEO described it as when the asset class is established utilized by the mainstream, cryptocurrencies would not require middlemen to process payments.
With non-custodial wallets and open-source platforms, users of cryptocurrencies can efficiently and securely transfer digital assets without paying additional fees on top of the transaction fee provided to the miners of the ecosystem.
In present scenario, due to the lack of merchant adoption, it is difficult for crypto users to compensate merchants to purchase simple products like coffee and food. Bigger Financial institution like Visa could single-handedly increase the adoption of crypto amongst merchants in a large capacity.
However, the intent of Visa to target the cryptocurrency sector is to provide middleman services several years from now when cryptocurrencies are already accepted by merchants and being utilized as substitute currency to reserve currencies like the US dollar.
High Time to Experiment
The time to support and experiment with cryptocurrencies is now, when it is experiencing exponential growth and is still at nascent stage of evolution.
Eventually, the cryptocurrency sector could heavily rely on decentralized systems and services, as seen in the development of the Binance decentralized exchange.
Currently, Fidelity, Goldman Sachs, and Citigroup have started to serve investors in the cryptocurrency market by seeing sufficient demand for the new asset class, while Visa, Morgan Stanley, and several other financial institutions remain cautious in entering the cryptocurrency market.
Mastercard Sought Crypto-Backed Assets, Intend To Undermine Decentralization
Still, many are anxious that crypto-centric forays from firms like Visa and MasterCard could spell the end of financial decentralization, even though it has only been a single decade since Satoshi Nakamoto, a pseudonymous innovator and coder extraordinaire, launched the Bitcoin that many have grown to love.
Earlier this year, MasterCard, Visa’s foremost competitor, filed a U.S. patent that outlined a “method and system for linkage of blockchain-based assets to fiat currency accounts.” While the patent’s given title doesn’t raise any immediate red flags, decentralization diehards quickly took issue with the document’s abstract, which mentioned “fractional reserves” in its first sentence.
The official patent, which is still pending for approval in the U.S. courts, outlines a method that allows New York-based Mastercard to manage fiat currencies and cryptocurrencies simultaneously. The system, which allows financial institutions to monetize blockchain networks will allow banks to facilitate fractional reserve banking for crypto assets through a complex ecosystem of databases, devices, and accounts.
Although these occurrences aren’t indicative of the firm’s final position on crypto assets due to Cryptocurreny’s Unregulated Industry, the bottom line is that MasterCard and Visa may not have the best intentions in mind when seeking to foray into this nascent market.