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Visa and Mastercard pause new crypto partnerships amid regulatory uncertainty

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(Kitco News) - Visa and Mastercard, two of the biggest names in payment processing, have both announced that they are taking a pause on forming new crypto-related partnerships amid the crypto industry's recent struggles, which include several high-profile bankruptcies.

According to a report from Reuters, the 2022 downturn in the crypto market which led to the collapse of the decentralized financial platform Terra, the cryptocurrency exchange FTX, and crypto lenders BlockFi, Celsius, Voyager and Genesis has rattled investors and led to an increase in regulatory scrutiny of the sector.

For these reasons, Visa and Mastercard have elected to delay the launch of certain crypto-related projects and services until market conditions and the regulatory environment improves.

"Recent high-profile failures in the crypto sector are an important reminder that we have a long way to go before crypto becomes a part of mainstream payments and financial services," a spokesperson for Visa said, while also making sure to note that this does not change the company’s crypto strategy and focus.

Mastercard will likewise continue to focus on exploring and integrating blockchain capabilities into its infrastructure while taking a pause from establishing new partnerships. "Our efforts continue to focus on the underlying blockchain technology and how that can be applied to help address current pain points and build more efficient systems,” a spokesperson for Mastercard said.

According to Thomas Hayes, chairman and managing member at investment firm Great Hill Capital, this move by Visa and Mastercard is likely a response to the absence of a clear regulatory framework for crypto which leads to a high level of uncertainty for industry participants.

“They cannot and should not move ahead until there is a clear regulatory framework,” Hayes said. "Delays are not attributable to their core business - as that remains strong. They are related to an uncertain regulatory environment for crypto and demand/interest for crypto services declining in the near term.”

Cuy Sheffield, Visa’s head of crypto, pushed back against the Reuters report, tweeting that Visa continues “to partner with crypto companies to improve fiat on and off ramps as well as progress on our product roadmap to build new products that can facilitate stablecoin payments in a secure, compliant, and convenient way.”

“Despite the challenges and uncertainty in the crypto ecosystem, our view has not changed that fiat-backed digital currencies running on public blockchains have the potential to play an important role in the payments ecosystem,” Sheffield said.

Payment processors have been getting more involved with blockchain technology in recent years amid a global push to reduce transaction fees. Visa and Mastercard have been two of the most active payment providers in terms of integrating blockchain and partnering with crypto firms.

In October, Visa partnered with JPMorgan to streamline cross-border payments through the use of their private blockchain networks Liink and B2B Connect. The service is now fully operational in ten countries and is projected to increase its presence to more than 30 countries by the end of 2023.

Google and Coinbase partnership will enable crypto payments for cloud services

In December, it was revealed that a team of Visa researchers and engineers were designing a smart contract application for a self-custodial wallet on the Ethereum blockchain that could enable programmable payment instructions like automated bill payments through a bank account. And in February, cryptocurrency payments platform Wirex announced that it signed a long-term strategic global partnership with Visa as part of the firm's goal to expand into the Asia Pacific (APAC) region and the U.K.

October was also a big month for Mastercard as the firm announced the launch of ‘Crypto Secure’, a new crypto service desk that deals with risk management and is designed to bring additional security and trust to the digital ecosystem, and also unveiled ‘Crypto Source’, a new program that will enable financial institutions to begin offering secure crypto trading services to their customers through a partnership with stablecoin issuer Paxos.

The payment processor also announced a partnership with the layer-two network Polygon in January to launch the Web3-based Mastercard Artist Accelerator program, which is designed to help connect artists from around the world with notable mentors and a dynamic fanbase as they learn and create in Web3.

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