Recently, Mastercard announced a new initiative to allow stablecoins to support settlement through its card network powered by Paxos. The commercial solution is now live and Mastercard customers in the United States will have the ability to pay for transactions in stablecoins thanks to Paxos’ regulated infrastructure and stablecoin expertise.
Fully blockchain-enabled financial markets will make the US dollar more accessible and globally ubiquitous. Tokenized dollars – also known as stablecoins – can make transactions faster, cheaper and more secure. Digital wallets with stablecoins will allow anyone in the world to have US dollar “bank accounts.” But to realize the grand vision of stablecoins, trusted service providers like Paxos and Mastercard must build the backbone of the system. This pilot is an important step in enabling choice for issuers to offer a crypto card program through already existing networks.
Here’s a simple breakdown of how Paxos is facilitating the settlement of funds involving stablecoins in support of Mastercard’s pilot:
- Paxos’ Role: We’re building the regulated infrastructure to facilitate stablecoin settlement. Paxos receives stablecoins from wallet providers on the Ethereum blockchain, immediately redeems them 1:1 for the underlying US dollars, and transfers those dollars to banking partners for settlement of customer purchases.
- Digital Wallet’s Role: Uphold, Inc., as the real-time crypto wallet provider, converts crypto spent on prepaid cards to stablecoin and sends to Paxos for US dollar redemption.
- Banking Partner’s Role: Evolve Bank & Trust, as the issuing bank participant in the Mastercard Network, receives the redeemed US dollars from Paxos to transfer to Mastercard for settlement.
- Mastercard’s Role: Mastercard receives US dollars from the issuing bank who will then settle its obligation to Mastercard.
“Reducing friction in experience and enabling choice for businesses and people around the world is at the core of our strategy,” said Raj Dhamodharan, executive vice president of digital asset and blockchain products and partnerships at Mastercard. “Through our engagement with Paxos and the larger digital assets community, we will make it simpler for partners to convert cryptocurrency to traditional fiat currency making it easier for issuers to offer card programs.”
JP Thieriot, CEO of Uphold, added, “We’re thrilled to be working with Mastercard and Paxos to advance the payments landscape and enable next-generation transactionality for consumers and merchants alike. Removing friction and barriers to entry is critical to ensure the wide adoption of digital payments, and Mastercard is in position to lead the way.”
This pilot and partnership with Mastercard is a critical development in financial technology and efficiencies for consumers worldwide. Digital asset adoption will only increase as we move into a mobile-first economy and Paxos is proud to build the road ahead.