Feb 28 (Reuters) – US payments giants Visa (VN) and Mastercard (MA.N) abandoned plans to forge new partnerships with crypto firms after a series of high-profile crashes shook confidence in the industry, people familiar with the matter told Reuters.
The crypto industry is seeing a stunning wealth reversal in 2022 as the bankruptcy of industry majors FTX and BlockFi rattled investors and increased regulatory scrutiny in the sector.
Both Visa and Mastercard have decided to hold off on launching certain crypto-related products and services until market conditions and the regulatory environment improve, said the people, who asked not to be identified because the talks are confidential.
“The recent high-profile failures in the crypto sector are an important reminder that we still have a long way to go before crypto becomes a mainstream part of payments and financial services,” said a spokesperson for Visa, the world’s largest payments processor.
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That has not changed the company’s crypto strategy and focus, however, the spokesperson added.
A Mastercard spokesperson said: “Our efforts continue to focus on the underlying blockchain technology and how it can be applied to help address current issues and build more efficient systems.”
Back off CRYPTO
Over the past few years, major card companies have warmed to crypto as the asset class’ popularity exploded, with some touting it as the next big thing in finance.
The card companies, which pocket a small percentage of the dollar value of the transactions they process, have announced numerous partnerships with crypto companies and set up dedicated teams to explore blockchain technology.
Mastercard teamed up with crypto lender Nexo in April to launch what it calls the world’s first “crypto-backed” payment card.
In November, Visa terminated its global credit card agreement with FTX, just a month after announcing an expanded partnership with exchanges.
Card company American Express (AXP.N) said in 2021 it would consider using crypto as a possible option for redeeming reward points in the future.
But it doesn’t see crypto tokens as a strategic priority any time soon, said a source familiar with the matter.
“In the near term, we don’t see crypto replacing our core payments and lending services,” an AmEx spokesperson said in an emailed statement, adding that the company continues to explore meaningful use cases for the technology.
“They can’t and shouldn’t move forward until there is a clear regulatory framework,” said Thomas Hayes, chairman and managing member at investment firm Great Hill Capital.
“The delays are not attributable to their core business – therefore remain strong. They are related to an uncertain regulatory environment for crypto and demand/interest for crypto services declining in the near term.”
Reported by Manya Saini in Bengaluru; Edited by Sweta Singh and Saumyadeb Chakrabarty
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