Determined to conquer the world of Web3, Mastercard, the world leader in credit cards, is pursuing its initiatives with a very ambitious plan. The company is committed to creating a world where crypto can be transferred seamlessly between public and private blockchains and where CBDCs, stablecoins and tokenized bank deposits are revolutionizing payments. In an interview with the press, Raj Dhamodharan, Vice President in charge of blockchain and crypto strategy at Mastercard, gives all the details on the company’s vision.
Tokenization of bank deposits or merging of the real economy and the crypto economy
For the Mastercard company, the last few months have been marked by a series of initiatives, some as innovative as the others in the crypto and NFT ecosystems. Most recently, she made a name for herself with her “Multi Token Network” (MTN). MTN wants to enable developers to build payment apps where tokenized bank deposits can be used for everyday payments and settlements.
In the interview given to the pressRaj Dhamodharan, Vice President in charge of blockchain and crypto strategy at Mastercard says that the ultimate goal of innovation is to get to such a point where bank deposits are transferred into the crypto economy for use. in the form of tokens.
Imagine for a second the money available in your bank account being represented in the form of tokens and able to be exchanged for another digital asset or used to make payments.
According to Raj, transactions will appear on one side as a bank deposit and will be received on the other side as a CBDC or a stablecoin. It will therefore be a question of mixing tokenized bank deposits, CBDCs and stablecoins within the same payment system.
Streamline cross-border payments through interoperability
Mastercard official says company aims to improve cross-border transfers through cryptocurrencies by solving problems of slow processing and execution of transactions from one country to another and eliminating transaction security risks .
The framework also specifies that tokenized bank deposits can be used in smart contracts. Thus will see the light of day a new range of financial applications, integrating conditional payments and triggers. Arrangements will be made for cross-border transfers to comply with the AML (anti-money laundering) and KYC (Know Your Customer) requirements of the countries involved.
How will this new system work?
According to Raj’s explanations, three elements will enter into the implementation of the new financial system designed by Mastercard. As a first step, the banks will have to accept that the bank deposits in their possession are represented in the form of tokens.
This will allow access to the trillions of dollars that fuel the real economy and create a more or less direct bridge between the real economy and the crypto economy.
As soon as deposits are tokenized and come to life on the blockchain, they will be more liquid and easier to move between banks and to non-bank entities like businesses for payments.
These deposits will be available in the form of payment tokens, representing different forms of currencies or in the form of asset tokens, i.e. NFTs representing various forms of assets.
But for a transaction to be completed, there will have to be coordination between all the parties involved. It will be necessary to know who will have to pay, what is the amount to be paid, in which currency the payment will be made, the conditions to be met for the transfer of value to be triggered, etc.
One party will send tokens and the other will receive the transfer in the form of stablecoin or CBDC depending on the country’s crypto environment. States, commercial banks, central banks as well as companies will thus collaborate within the same framework to make cross-border transfers possible and more fluid.
As things stand, such a coordination system does not yet exist and this is what, according to the Mastercard framework, justifies the slowness of certain interbank transactions or from banks to non-bank entities. Several trade agreements will have to be put in place.
Are we on the verge of the creation of a global currency?
Without wanting to go into apocalyptic suppositions, the rapid advance of cryptocurrencies and the recent entry into the crypto market of international payment giants makes you think. We are certainly moving towards a new era where the real economy totally merges with the virtual economy, the era of the rise of CBDCs, stablecoins, NFTs and tokenized bank deposits.
Banks will represent their customers’ deposits in the form of tokens while invoices, payslips, etc., will be represented in the form of NFTs and can be exchanged for rights.
As the Executive Vice President of Mastercard indicates, a currency created in another private blockchain system will be able to be transferred in a given form for transactions and be available for all the applications that a public blockchain would be able to host. . So imagine the possibilities if this were to be extended to other currencies?
In pursuit of its vision, Mastercard, the executive recalls, recently participated, jointly with several major American financial institutions, in the publication of reports open to the public demonstrating the technical and legal viability of this innovation. Currently, as announced by Raj Dhamodharan, the Australian Reserve Bank has already set up an initial system for Mastercard’s pilot system with a CBDC.
China already has its CBDC and could be a favorable market for the adoption of this technology. Similarly, the adoption of the MICA last April can be considered a positive sign for the European market. While this suggests a clear path to materialization, it will still take several years for most bank deposits to be tokenized and for these tokens to serve as exchange mechanisms or underpin the foundations of a new financial system.
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