Payment giant Mastercard received a BitLicense from the New York State Department of Financial Services (NYDFS) on Wednesday amid a quest to expand stablecoin services in the nation.
The “green light” marks an essential regulation step which will enable the payments firm to conduct its activities in relation to digital assets within one of the most stringent cryptocurrency regulatory regimes in the United States.
The permit was issued to Mastercard Transaction Services (U.S.) LLC and is part of a larger initiative by the company to develop digital asset capabilities via blockchain settlements and payment systems.
The company made the official announcement in a period when banks and traditional payment networks are becoming interested in developing blockchain solutions in the form of stablecoins, tokenized deposits, and blockchain settlement rails.
Industry experts believe that blockchain technology can lower frictions in global payments systems, reduce costs associated with transactions, and increase their speed and efficiency in comparison with older infrastructure based on banking institutions that involve more intermediaries and longer periods of settlement.
Mastercard strengthens digital asset strategy
According to Mastercard, the approval serves to enhance its vision on the integration of digital assets in the overall payments infrastructure with a high level of regulatory compliance.
“Innovations require clear regulatory frameworks, as these are critical for building trust and creating confidence in new forms of digital value that evolve beyond their experimental stage,” Jorn Lambert, Mastercard’s Chief Product Officer, stated.
These remarks demonstrate Mastercard’s position on regulation as an enabling factor rather than an obstacle.
What is the BitLicense framework?
BitLicense regulation in general was first issued by NYDFS in 2015 and is seen as one of the most stringent crypto regulations in the world.
To be able to issue cryptocurrency-related products, businesses have to maintain high standards regarding capital adequacy, infrastructure, compliance, and consumer protection.
In addition, firms that get the license are subject to continuous monitoring, which means that they will need to constantly report to regulators and comply with the necessary standards, rather than getting a one-time permission.
On the one hand, despite certain complaints from some firms operating in the sector, BitLicense regulation is viewed positively due to its contribution towards establishing order on the market.
On the other hand, many native crypto firms have complained about the regulation due to the fact that it is costly, time-consuming, and not easy to acquire.
Due to high regulatory barriers, not a lot of companies are able to operate within the regulation, however, getting the license can prove beneficial from the standpoint of gaining trust and legitimacy.
Mastercard joins select firms securing BitLicenses
Mastercard now enters an exclusive club as one of the few companies that have recently earned the right to be issued a BitLicense amid increasing interest in cryptocurrency regulation.
Digital finance services provider Galaxy Digital received their BitLicense last month after payments processor Strike received their license back in March.
It seems like only a handful of businesses managed to get BitLicenses in the nearly decade since this particular regulatory framework has been introduced.
This decision is consistent with Mastercard’s efforts to get more involved in stablecoin payments infrastructure. The payments network announced plans to buy stablecoin payments processor BVNK for $1.8 billion back in March.
A stablecoin refers to a cryptocurrency whose value is tied to the value of fiat currencies like the US dollar. Such cryptos are already in use for international transactions, treasury processes, and B2B settlements.
The primary strength of the stablecoin payment option comes in terms of speed. Stablecoin transfers happen freely within the blockchain networks without any set cut-off time; thus, transactions can be completed more quickly compared to the standard payment system that uses time limits.
According to Mastercard, the approval of the BitLicense would facilitate its digital currency program which involves the development of stablecoins and tokenized deposits. However, this program is meant to ensure that the Mastercard maintains its high standards of compliance, security, and reliability just like before.
“The continued advancement of the intersection of traditional and digital assets is a top priority for Mastercard and our customers, and we will continue our efforts to foster interoperability across these different systems,” the company stated.
Mastercard plans to act as an important intermediary between the old-fashioned payments system and the new emerging blockchain payment systems.