SHOPPERS could soon use cryptocurrencies to pay in shops more easily after MasterCard said it would support transactions on its network later this year.
The card and payments processor revealed it is preparing for changes in the way people pay for items and wants to provide "more possibilities for shoppers and merchants."
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The move comes amid increased interest in cryptocurrencies.
The largest and most well-known cryptocurrency, Bitcoin, surged in value to more than $48,000 this week after Tesla founder Elon Musk revealed a $1.5bn investment in the virtual coin.
The value of crypto coins such as Ripple and Dogecoin has also risen in recent weeks after discussions on Reddit investing forums.
MasterCard hasn't mentioned any cryptocurrencies in particular but Raj Dhamodharan, executive vice president of digital assets at the company has said digital assets are becoming an important part of the payments world.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
He said: "We are seeing this fact play out on the Mastercard network, with people using cards to buy crypto assets, especially during Bitcoin's recent surge in value.
"We are also seeing users increasingly take advantage of crypto cards to access these assets and convert them to traditional currencies for spending."
Shoppers can already buy items with Bitcoin using their virtual wallet where the coin's code is stored.
They would need to scan a QR code or send their Bitcoin to a recipient's address.
The risks of buying with cryptocurrencies
Investing and making a purchase in cryptocurrencies such as Bitcoin is risky .
Their value is highly volatile and City watchdog the Financial Conduct Authority has warned investors should be prepared to lose all their money.
Investing in cryptocurrencies is not a guaranteed way to make money.
You should also think carefully about making purchases with a cryptocurrency.
For example, Bitcoin has had wild price fluctuations in recent months and the price can change on an almost hourly basis.
The price of a Bitcoin was at $40,258 on January 9, according to Coindesk, but fell to $34,214 just three days later.
That's a 15% drop.
These price swings are risky for a business as you could sell an item for a Bitcoin at one price and the value may drop soon after, leaving you with less money from a sale.
Similarly, the price of Bitcoin has soared by more than 21% since the start of this week so it can be hard for a shopper to get an accurate idea of the price of an item if its value changes on a daily basis.
There are also cards such as BitPay that convert cryptocurrencies into real-life or fiat money.
This process would be simplified if MasterCard supported payments on its network in the same way it processes transactions when a shopper pays by card.
Mr Dhamodharan said MasterCard is not recommending using cryptocurrencies but wants to provide choice.
He added: "This change may open merchants up to new customers who are already flocking to digital assets, and help sellers build loyalty with existing customers who want this additional option.
"Customers will be able to save, store and send money in new ways.
"We want to help these concepts flourish and reach their potential, while also developing and encouraging the necessary guardrails."
He said not all of today's cryptocurrencies will be supported and digital assets will need to be secure and have strict compliance procedures to spot fraud.
Mr Dhamodharan also hinted that MasterCard was more likely to favour stablecoins, which are linked to the value of an asset such as gold or a currency.
Bitcoin isn't a stablecoin.
There are hundreds of stablecoins such as Tether and True USD that are linked to the value of the dollar.
Mr Dhamodharan said: "People will want to use these digital assets for payments, so that is one of our criteria too.
"To reach our network, crypto assets will need to offer the stability people need in a vehicle for spending, not investment."
Crypto enthusiasts are excited by this development and suggested it could help push the value of Bitcoin furhter towards $70,000.
Simon Peters, cryptoasset analyst at trading platform eToro, said: “Mastercard is the operator of the second-largest network of credit cards in the world, and for a business of that size to be making this decision shows the long-term trend for cryptoasset adoption.
“While we may see short-term upside in the price of bitcoin and other cryptoassets as a result of this, Mastercard's announcement – coming so soon after Tesla's own comments earlier this week – has real long-term implications for Bitcoin and its peers."
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