Mastercard to make it easier for banks to offer crypto services

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

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

If your bank participates in Mastercard’s pilot program, it can 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 did not receive a response at the time of publication. The press release also did not reveal a timeline, although 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 increasing. 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 will give banks the ability to offer crypto trading to customers through their standard website or app without having to develop their own in-house technology. For customers, it will mean the ability to trade crypto on the platform of a bank they trust.

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

Mastercard’s pilot isn’t the first time a major 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 US dollars are stored and sent, but these features are only available in the PayPal ecosystem.

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

• BNY Mellon, America’s oldest bank, said it now holds and transfers Bitcoin and Ether for some customers.

Most consumers do not have access to crypto through their bank. But if you do 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 can technically control these keys. This isn’t necessarily a red flag – many popular exchanges offer “non-custodial” wallets – but it’s better to have the ability 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 is usually a fee – often a percentage of the total sale. Some exchanges are expensive, some are cheaper. Don’t settle for anything over 1% per trade, even if the convenience factor is high.

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