- B Vrettos and M Bacina
Mastercard expedites CBDC exploration
Mastercard positioned itself early as a key institutional player to facilitate central bank digital currencies (CBDCs). The Q1 2021 earnings call foreshadows no intention to slow down as Mastercard will begin to explore applications to exist on top of CBDCs.
Earlier this year Mastercard established a framework for their digital asset endeavours. Primarily this involved bolstering consumer protection, AML/CTF compliance and a focus on spending rather than investment and holding. The foray into smart contracts appears to be the next step here.
Reportedly, Michael Miebech, CEO of Mastercard, said that Mastercard intends to explore applications that can exist on top of CBDCs and that:
this could be a smart trade contract...So smart contract technology is what we’re investing in.
Miebech also stated that several central banks are following a "two-tiered approach" where the central bank will mint the CBDC whereas the private sector institutional players would distribute them. This provides a key opportunity for Mastercard to move into the distribution of CBDCs as well as exploring the potential for smart contracts to enhance user functionality.
In quick succession, Gemini has also announced that they have partnered with Mastercard to launch their crypto rewards credit card later this year. Gemini is the cryptocurrency exchange and custodian behind many of the Bitcoin ETF's that were listed earlier this year on the Toronto Stock Exchange. It is not clear if Gemini has partnered with Mastercard to take advantage of the exploration into smart contracts, however, it will be interesting to see how the pair execute the digital rewards and the interest earning program, 'Gemini Earn'.
Reportedly, Mastercard has “several new crypto partnerships approved for launch this quarter”. It will be interesting to see if, and how, these partners harness the proposed smart contract functionality and whether this raises any regulatory concerns as Mastercard potentially dabbles into offering a smart trade contract.