Traditional financial institutions are accelerating their entry into the encryption space. On June 24, payment giant Mastercard announced that it will provide on-chain cryptocurrency purchase services, further promoting the mainstreaming of encryption payments.

In fact, in recent years, Mastercard has been continuously deepening its encryption strategy and has moved from experimental exploration to actual implementation, becoming a key player in its global financial landscape.

Swipe your card to buy coins? MasterCard opens the on-chain deposit channel.

Yesterday, Chainlink and Mastercard officially announced a strategic partnership that will allow over 3 billion cardholders worldwide to purchase cryptocurrency directly on-chain using their credit cards. This is not only another significant move by Mastercard in the encryption field, but it also achieves a deep integration of traditional financial networks with the core components of DeFi in the fiat currency deposit path, potentially opening a new channel for the mass adoption of on-chain finance.

According to the introduction, in this service system, users do not need to register for a centralized exchange (CEX) account or go through a complicated on-chain bridging process; they can simply initiate a transaction request through the DEX Swapper Finance that integrates this feature to purchase encryption assets using a MasterCard.

Among them, Swapper Finance serves as the user front-end entry point, supporting the initiation of credit card payment instructions; traditional payment gateway service provider Shift4 Payments offers seamless card payment processing, verifying and handling users’ fiat currency payments (such as USD, EUR, etc.); ZeroHash, as an encryption currency and stablecoin infrastructure provider, is responsible for converting users’ fiat currency into encryption currency (such as BTC, ETH, etc.), ensuring compliance, providing liquidity, and on-chain services; Chainlink’s decentralized oracle network and interoperability standard (CCIP) ensure the security of on-chain transactions and the reliability of data, while its ecosystem DEX XSwap utilizes protocols like Uniswap to obtain liquidity and complete the on-chain exchange of encryption currency.

Ultimately, the encryption assets will be directly sent to the user’s on-chain wallet address via smart contracts, and the entire process does not require understanding of trading pairs, Gas fees, or slippage parameters, nor does it require switching to a centralized trading platform.

It is important to know that in the past few years, traditional payment companies such as Visa and Mastercard have mostly focused their collaborations in the field of encryption on the consumer side, specifically by allowing users to spend coins through encrypted debit cards, which automatically convert their held digital assets into fiat currency for everyday payments, such as the encrypted debit card launched by Uphold and Worldcoin.

However, this collaboration between Mastercard and Chainlink is no longer about using on-chain assets for real-world consumption, but rather directly opening up a channel for fiat deposits to on-chain assets, allowing non-cryptocurrency native users to simply swipe their card as if shopping on Amazon to obtain on-chain assets, without needing to understand any DeFi concepts, while being compliant and transparent. This not only breaks down the long-standing barriers for DeFi users regarding deposit difficulties but also provides a compliant, secure, and controllable on-chain channel for the traditional financial system.

In this regard, Raj Dhamodharan, Executive Vice President of Blockchain and Digital Assets at Mastercard, stated, “People want to be able to easily connect to the digital asset ecosystem, and vice versa. This is why we are continuously leveraging our global payment network and mature experience to bridge the gap between on-chain commerce and off-chain transactions. By collaborating with Chainlink, we are opening up a secure and innovative way to fundamentally transform on-chain commerce and drive broader adoption of encryption assets.”

“This is a typical case of the integration of traditional finance and decentralized finance. I am very excited about Chainlink’s ability to drive this key connection from traditional payment networks to the on-chain DEX trading environment. This is a complex and multi-layered collaboration, and I am delighted that we can facilitate it with the power of the Chainlink community,” said Chainlink co-founder Sergey Nazarov.

To leverage encryption to stimulate new business models, this year focuses on three major areas.

“The key issue hindering the mainstream adoption of cryptocurrency is that it is difficult for users to identify and transfer funds to each other using familiar methods. Mastercard’s goal is to serve as a connector between traditional finance and blockchain networks, stimulating new business models while ensuring compliance.” Raj Dhamodharan, head of Mastercard’s cryptocurrency and blockchain business, pointed out recently that Mastercard has moved from the experimental stage to providing actual encryption solutions.

In fact, unlike many traditional financial institutions that still view encryption as a marginal area or regulatory risk, Mastercard is deeply advancing its layout in the encryption field, gradually integrating cryptocurrency assets, stablecoins, and tokenized assets into the daily payment experience.

According to a report submitted by Mastercard to the US SEC in February this year, the company has made significant progress in achieving its goal of an “innovative payment ecosystem”, including transaction tokenization, creating solutions to unlock blockchain-based business models, and simplifying access to digital assets. At the same time, the document clearly states that digital currencies have the potential to disrupt traditional financial markets and may directly challenge its existing products. Due to the accessibility, immutability, and efficiency of digital assets, stablecoins and encryption may become more popular as they come under regulation, emerging as competitors in the payment industry.

Before card payments for coins became a reality, Mastercard had been promoting the commercialization of encryption payments, collaborating with cryptocurrency companies such as Binance, Kraken, MetaMask, 1inch, and Floki to launch co-branded encryption debit cards, allowing cardholders to directly spend with cryptocurrency, with automatic conversion to fiat currency happening in the background.

Moreover, in the process of laying out encryption payments, stablecoins are also becoming the strategic hub of Mastercard’s on-chain settlement.

Recently, Mastercard joined the stablecoin alliance Global Dollar Network initiated by institutions such as Paxos, to jointly mint and share the interest income of the stablecoin USDG, which is pegged to U.S. Treasury bonds. At the same time, Mastercard will also support PayPal’s PYUSD and Fiserv’s FIUSD stablecoins, integrating them into the Mastercard Move payment network; in May, Mastercard announced a partnership with cryptocurrency payment company MoonPay to launch a new stablecoin payment card, enabling users to make stablecoin payments at over 150 million merchants worldwide, with transactions automatically converted to fiat currency; in April, Mastercard announced collaborations with Nuvei, Circle, and Paxos to launch a comprehensive stablecoin payment solution, allowing merchants to soon directly use stablecoins, including USDC, for transaction settlements. In the same month, Mastercard partnered with OKX to launch the OKX Card, supporting stablecoin payments in its vast merchant network, as well as establishing a strategic cooperation with Bleap, founded by former Revolut employees, aimed at integrating stablecoin payments more deeply into traditional financial infrastructure, etc.

These intensive actions demonstrate that Mastercard is integrating stablecoins into users’ daily consumption, settlement, and transfer behaviors. To enhance the security of encryption asset transactions and user friendliness, Mastercard previously launched Crypto Credential, which reduces the likelihood of errors occurring during the transfer of cryptocurrency by using easy-to-use aliases to replace complex wallet addresses.

In addition to stablecoins, Mastercard is also vigorously promoting the construction of asset tokenization. In April of this year, Mastercard revealed that it is developing a Multi-Token Network, aiming to replicate its traditional payment network to provide digital asset trading infrastructure for consumers, merchants, and financial institutions. The system will integrate on-chain and off-chain asset flows, ensuring compliance and optimizing user experience. Mastercard has partnered with JPMorgan, Standard Chartered, and others to explore scenarios such as cross-border payments and carbon credit tokenization, having applied for over 250 blockchain-related patents since 2015; in February, Ondo Finance joined the Mastercard network to improve cross-border payments, and its short-term U.S. government bond fund (OUSG) investment product will be open to enterprises on the Mastercard Multi-Token Network (MTN), enabling them to earn returns through tokenized assets; in November last year, Mastercard had cooperated with JPMorgan’s digital asset business Kinexys on its blockchain-based tokenized asset transfer system Multi-Token Network (MTN), aiming to enhance B2B cross-border payments, provide greater transparency and faster settlement speeds, and reduce time zone friction; in August of the same year, to combat the ever-increasing problem of online fraud, Mastercard is planning to eliminate credit card numbers and expand its tokenization program that uses biometric data such as fingerprints or facial scans as security measures; in May 2024, Mastercard completed a proof-of-concept test for tokenized deposits through the Hong Kong Monetary Authority’s regulatory sandbox. According to Mastercard, it has achieved 30% transaction tokenization by 2024.

“We believe that the future financial system will include both bank deposits and stablecoins. Deposits serve as the funding base, while stablecoins provide on-chain efficient settlement capabilities. If there can be more regulatory clarity in the future, allowing deposits to be represented in some form on public chains, this will be key to the tokenization of large-scale expansion.” In an interview months ago, Dhamodharan revealed that Mastercard has set its 2025 strategic focus on three areas: on-chain/off-chain deposits and withdrawals, Crypto Credential promotion, and stablecoin applications. Currently, Mastercard supports financial institutions in using stablecoins for transaction settlements and plans to announce more partnerships and application scenarios this year to continue advancing the integration of encryption.

In the accelerated process of integration between traditional financial institutions and the encryption sector, Mastercard is breaking through in three major areas to build its own crypto business landscape.

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