Mastercard to Make It Easier for Banks to Offer Crypto Services

A pilot program would make it easy for banks to let customers buy, hold and sell crypto.

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Today, Mastercard announced an upcoming pilot program called Crypto Source that will allow traditional banks and other fintech companies to let their customers buy, hold and sell crypto assets. To offer these services, Mastercard is expanding its partnership with Paxos Trus Company, a blockchain infrastructure platform. Most crypto investors currently use crypto exchanges such as Coinbase or Gemini for such services. But those exchanges don’t offer traditional banking services, and they require opening a separate account.

Mastercard’s pilot program is the latest example of a major financial services company expanding its crypto services, and it could make crypto more accessible to more people if successful.

What it means for you

If your bank participates in Mastercard’s pilot program, it could give you a way to buy or sell crypto without opening a separate account with a crypto exchange. NerdWallet asked Mastercard how many banks will be included in the pilot program but didn't receive an answer as of publication time. The press release also didn’t reveal a timeline, though Jorn Lambert, Mastercard’s chief digital officer, said in an interview with CNBC that the pilot program will begin in the first quarter of 2023.

The number of people who have bought cryptocurrency is rising. According to the results of a June 2022 survey conducted by Mastercard, 65% of respondents globally would prefer “crypto-related services to be provided by their current trusted financial institution.” This Mastercard program would give banks the ability to offer crypto trading to customers through their standard website or app without having to develop their own internal technology. For customers, it would mean the ability to trade crypto on the platform of a bank they trust.

A bank using this service would also have access to Mastercard’s identity services, analytics and transaction monitoring services, anti-money laundering technology, loyalty and marketing programs, and cybersecurity. These services have been in place for decades via the credit and debit cards Mastercard administers. At the same time, the partnership could rankle some cryptocurrency enthusiasts who see crypto as an opportunity to bypass this type of centralized service.

» Get started: Best crypto exchanges

Other big companies are getting into crypto

Mastercard's pilot isn't the first time a big company has dipped its toes into crypto:

  • Mastercard already gives banks the ability to offer credit cards that enable crypto payments, as does Visa.

  • PayPal offers customers the ability to buy, sell and pay with crypto using the same account where their U.S. dollars are stored and sent, but these features are available only in PayPal’s ecosystem.

  • Google and Coinbase recently announced a partnership in which crypto will become a payment option for some Google Cloud customers, and Google will use Coinbase Prime for some crypto services, including secure custody.

  • BNY Mellon, the U.S.’s oldest bank, said it is now holding and transferring Bitcoin and Ether for some customers.

Say you could keep crypto with your bank. Should you?

Most consumers don’t have access to crypto through their bank. But if you get access, ask these questions before signing up.

  • Who owns your crypto? Using a cryptocurrency requires you to unlock it with a digital password called a key. If you store your cryptocurrency using an online exchange or service, it may technically control those keys. This isn’t necessarily a red flag — many popular exchanges offer “noncustodial” wallets — but it’s better to have the option to move your crypto to a wallet you control if you want.

  • What are the fees? When you buy or sell crypto on an exchange, there’s usually a fee — often a percentage of the total sale. Some exchanges are expensive, some are cheaper. Don’t settle for anything above 1% per trade, even if the convenience factor is high.

  • What happens if there’s a hack? Crypto is a target for hackers. Unlike savings accounts, which are protected by Federal Deposit Insurance Corp. insurance, there’s no universal backstop for crypto accounts. However, some companies provide insurance to cover losses if there’s a breach. Ask about what policies, procedures or insurance the bank has in place.

Neither the author nor editor held positions in the aforementioned investments at the time of publication.
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