According to a Reuters report, Visa and Mastercard, two of the biggest payment processors in the world, have decided to put on hold their plans to form new alliances with cryptocurrency companies. The decision is thought to have been made in response to worries about the regulatory framework that surrounds the digital asset sector.
Although Visa and Mastercard have both been looking into methods to integrate cryptocurrencies into their payment networks, it is said that the companies have recently grown more cautious due to the hazy regulatory environment. Since cryptocurrencies are not presently governed by the same laws as conventional financial assets, some regulators are worried about possible threats to consumer protection and financial stability.
The news follows several high-profile governmental crackdowns on activities related to cryptocurrencies in nations like China and India. While cryptocurrency mining and dealing have been outlawed in China, there are reports that legislation to criminalise cryptocurrency possession, mining, trading, and issuance is being considered in India.
Sources with knowledge of the situation claim that Visa and Mastercard are wary of partnering with cryptocurrency companies that operate in nations with ambiguous or stringent crypto laws for fear of regulatory repercussions. The companies reportedly agreed to put a hold on any future alliances until the regulatory landscape is more clear.
Despite the news, it is still thought that Visa and Mastercard are committed to looking into business possibilities in the cryptocurrency sector. In a recent earnings call, Visa CEO Al Kelly stated that the business sees “a lot of potential for cryptocurrencies to continue to expand and become more mainstream.” Both companies have previously expressed interest in cryptocurrencies.
Additionally, agreements have already been established between some cryptocurrency businesses and Visa and Mastercard. In order to debut a debit card that enables users to use their cryptocurrency holdings in-store and online, Visa announced a partnership with cryptocurrency exchange Coinbase last year. To provide cryptocurrency payment cards, Mastercard has collaborated with a number of cryptocurrency businesses, including BitPay and Wirex.
The industry has been working to increase acceptance and integrate into the mainstream banking system, so Visa and Mastercard’s move to halt new crypto partnerships is likely to be a setback. While some businesses have accepted cryptocurrencies and added them to their balance sheets or permitted customers to use them for purchases, others have been more cautious. Examples of these businesses include Tesla and PayPal.
A number of significant financial institutions have started to look into opportunities in the cryptocurrency sector in recent months. A new cryptocurrency will be released by JPMorgan Chase, and Goldman Sachs has allegedly restarted its cryptocurrency trading desk after closing it in 2018.
The market has already been impacted by the news that Visa and Mastercard have decided to put a halt to new cryptocurrency collaborations. Following the news, Bitcoin, the biggest cryptocurrency by market capitalization, dropped by more than 6%, and other cryptocurrencies also saw drops.
Many in the business are upbeat about cryptocurrencies’ long-term prospects even though the regulatory environment for them is still uncertain. Cryptocurrencies, according to some analysts, have the potential to overtake traditional financial institutions and increase financial inclusion for people all over the globe. The industry’s ability to overcome regulatory obstacles and expand its acceptance among companies and consumers is still up in the air, though.
Regulatory worries have reportedly caused Visa and Mastercard to halt new alliances with bitcoin companies. According to reports, the businesses are concerned about possible regulatory backlash if they collaborate with cryptocurrency companies in nations with murky or onerous crypto regulations. Both businesses have previously expressed interest in cryptocurrencies, but because of the hazy legal environment, they are now being more cautious. The news is anticipated to be a setback for the cryptocurrency sector, which has been trying to gain acceptance from the general public.