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CoverStory

States a high priority is being placed on investments in launched a global crypto advisory practice to help clients
blockchain and cryptocurrencies. Ninety-two percent of and partners "advance their crypto journey."
executives surveyed by FTI believe financial institutions
will fully adopt blockchain within the next three years. Not to be left out, Mastercard also supports cryptocurrencies
on its network. It has a partnership with the crypto-wallet
Mining the ether for digital bucks platform Bakkt Holdings Inc. to support issuance of crypto
The decentralized nature of blockchain—no central cards by participating financial institutions. "Mastercard
bank controls the value—is what sets it apart from isn't here to recommend you start using cryptocurrencies.
traditional currencies like the U.S. dollar or Japanese But we are here to enable customers, merchants and
yen. Cryptocurrencies are "mined" by solving complex businesses to move digital value – traditional or crypto
cryptographic equations using sophisticated computers. – however they want," Raj Dhamodharan, executive vice
Think of miners as high-tech auditors, as they are president, blockchain/digital asset products and digital
confirming the legitimacy of cryptographic transactions partnerships at Mastercard, wrote in a blog post.
for recording to a blockchain. The miner who solves a
problem first is rewarded with cryptocurrency, and thus Payments consultant Richard Crone characterizes these
new cryptocurrency is put into circulation. moves as "a greenfield opportunity to pump more
volumes through their processing pipes." Others have
Bitcoin was the first cryptocurrency, introduced in characterized it as a survival tactic. Patti Wubbels, senior
2009, and despite bitcoin not being legal tender in most vice president of the crypto advisory team at consultancy
parts of the world, it has triggered an avalanche of new Strategic Resource Management, said cryptocurrency has
cryptocurrencies. As of mid-January, there are more than the potential to do to card networks what Uber did to the
5,000 cryptocurrencies in digital circulation, worldwide. taxicab industry. "It's a very disruptive technology that's
The combined value: $2.2 trillion, according to the website turning everything upside down," she said.
Statista.
The disruptive nature of cryptocurrency also has
In the early days, crypto was seen as an investment raised concerns with policymakers. Presently, there is
strategy, not unlike gold. Cryptocurrency values can no overarching or centralized regulatory framework
fluctuate wildly, however—more than gold ever has. In for cryptocurrency markets in the United States. Some
early November 2021, a single bitcoin was worth more than cryptocurrency exchanges and stablecoin issuers have
$67,500; by late January that single bitcoin had lost nearly obtained state money transmitter licenses, and at least one
half its value. The factors contributing to this volatility are crypto platform, Paxos, received conditional approval last
much the same as for other investments: news headlines year from the Office of the Comptroller of the Currency
and investor speculation. But because the crypto market for a national bank charter.
is dominated by retail (not institutional) investors, it is
more susceptible to wild speculative swings, experts have Gary Gensler, chairman of the Securities and
observed. Exchange Commission, stated publicly that he believes
cryptocurrencies should be registered as securities and
Stablecoins are cryptocurrencies structured to minimize regulated as such. The Commodity Futures Trading
price volatility, and are typically pegged to fiat currency. Commission also has pushed for regulatory jurisdiction
USD Coin, for example, is a stablecoin pegged to the over cryptocurrencies. Both the U.S. House and Senate
U.S. dollar. The stable value of these crypto assets began have held fact-finding hearings on cryptocurrency
attracting a lot of investors in 2021, according to McKinsey regulation.
& Co., which estimated $3 trillion in stablecoins were
traded just in the first half of last year. Prior to then, Marwan Forzley, co-founder and CEO of payments
stablecoins in circulation totaled under $300 billion. provider Veem, believes some type of regulation is needed
to foster a robust crypto market. "The more regulated
Several central banks, including the U.S. Federal Reserve, crypto is, the more likely it is to achieve scale," he said. "It
have been exploring the idea of creating their own [regulation] provides cover for banks and networks that
stablecoins, known collectively as central bank digital want to get involved."
currencies (CBDCs). Some of this activity has been "born A new era in payments
out of reservations about the impact of privately issued
stablecoins on financial stability and traditional monetary "The technology that crypto has introduced into the
policy," McKinsey noted recently. CBDCs are also seen as payments sphere is unparalleled," said industry attorney
a means of improving financial inclusion and reducing Adam Atlas. Payments professionals ignore it at their peril,
payments friction, the consultancy explained. he suggested. "Everyone in the payments sphere should
get a [crypto] wallet and buy at least some crypto," to gain
Card brands take notice better understanding, Atlas added. "If you don't, you're

Last March, Visa became the first card network to rendering yourself ignorant of this important trend."
settle transactions in USD Coin. And in December, Visa

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