Mastercard’s payments network includes both its own branded cards and those issued by financial institutions that issue Mastercard branded cards to their customers. The company is going to launch a product to fight crypto scams/fraud.
The Crypto Card Program is designed to remove barriers for participating fintech companies by reducing the time and cost to onboard new merchants and consumers, streamlining business process flow, offering dedicated fintech and digital asset experts to accelerate growth, as well as providing access to in-market teams that can help in other areas of growth.
- In Tuesday’s launch, MasterCard will introduce Crypto Secure, a product that helps banks assess the risks associated with crypto merchants.
- Mastercard acquired the blockchain security startup CipherTrace last year to power the service.
- A backdrop of growing crime in the nascent digital asset market prompted MasterCard to launch the service.
According to CNBC, Mastercard on Tuesday will unveil software that can help banks identify and stop fraudulent cryptocurrency exchange transactions.
As part of the Mastercard payment network, the Crypto Secure system uses “sophisticated” artificial intelligence algorithms to identify risks associated with crypto exchanges. Among other sources, the system uses data from the blockchain, which is a public record of crypto transactions.
CipherTrace, a blockchain security startup acquired by Mastercard last year, will power the service. In Menlo Park, California, CipherTrace assists businesses and government agencies in investigating illicit cryptocurrency transactions. The company’s main rivals are New York-based Chainalysis and London-based Elliptic.
The launch of Mastercard’s digital asset service coincides with a growing crime scene in the nascent market. Cryptocurrency entering wallets with known criminal connections surged to a record $14 billion last year, according to data from blockchain analytics firm Chainalysis. Crypto investors have also been targeted by a series of high-profile hacks and scams in 2022.
With Crypto Secure, banks and other card issuers can see a dashboard with colored ratings representing the risk of suspicious activity, ranging from red for “high” to green for “low.”
The Crypto Secure team does not take a judgment call on whether a crypto merchant should be turned away. Card issuers are responsible for making that decision.
Consumers, banks, and merchants want to be able to trust digital asset transactions with the same level of trust we provide for digital commerce transactions. – Ajay Bhalla, President of Cyber and Intelligence, Mastercard
Similar technology is already used by MasterCard to prevent fraud in fiat currency transactions. The company is expanding such functionality to bitcoin and other virtual currencies with Crypto Secure.
According to Mastercard’s president of cyber and intelligence, Ajay Bhalla, the move is intended to ensure that its partners remain compliant with complex regulatory requirements.
According to him, the market for digital assets is now quite large, substantial, and growing fast, as he told CNBC in an exclusive interview ahead of the launch.
“For consumers, banks, and merchants, we want to be able to provide the same kind of trust for digital asset transactions as we do for digital commerce transactions.”
Since more banks and payment companies have entered the crypto fray with their own services for trading and storing digital assets, compliance has become a major concern. With the launch of custody services for institutional clients last month, Nasdaq became the latest established financial firm to embrace crypto on Wall Street.
In the meantime, governments on both sides of the Atlantic are considering new regulations for the crypto sector, which has largely been unregulated. A landmark crypto law was enacted by the European Union last month, while the Biden administration released its first-ever framework for regulating the crypto industry in the U.S.
At a time when digital currencies are falling in value and volumes have dried up, the payments giant is doubling down on crypto. Since the peak of a huge rally in November 2021, the market has lost roughly $2 trillion in value.
In recent weeks, Bitcoin has struggled to rise meaningfully above $20,000 a coin, nearly 70% lower than its all-time high of nearly $69,000.
In response to a question about the effects of crypto price declines on Mastercard’s digital asset strategy, Bhalla said the company is focusing on long-term solutions for its stakeholders.
The market cycles will come and go, he explained. You have to take the long view that this is a huge marketplace now and it is likely to grow even bigger in the future.”
Although digital token prices have slumped, crime in the industry has not abated. Crypto investors have been swindled of their funds this year by taking advantage of blockchain bridges, tools that allow assets to be exchanged between crypto networks. Since the start of 2022, breaches on these cross-chain bridges have cost about $1.4 billion.
As a result, major financial institutions and crypto platforms are attempting to lower the risk of ill-gotten gains being transferred through their systems. Money laundering and other illicit activities are often attributed to cryptocurrency use – an issue exacerbated by the pseudonymous nature of participants on blockchain networks.
Crypto criminals’ ill-gotten gains have become easier to trace thanks to new software tools. A growing number of companies are using data science and machine learning techniques to analyze public blockchain data.
Visa, MasterCard’s main rival, has also made significant investments in the crypto space. A crypto platform account linked to a Visa card facilitated $2.5 billion in transactions in Visa’s first fiscal quarter of 2022.
From rolling out crypto features to exploring non-fungible tokens, Visa launched a crypto advisory practice last year.
According to MasterCard, its network of 2,400 crypto exchanges does not disclose the overall dollar value of fiat-to-crypto volumes. The number of transactions the credit card giant facilitates per minute has now climbed into the thousands, according to Bhalla.
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