Major credit card company Mastercard has announced it is preparing to integrate cryptocurrencies into its loyalty program offerings for U.S.-based banks, merchants, and fintech firms on its payment network.
In an Oct. 25 announcement, Mastercard said it would be working with digital asset platform Bakkt to allow its customers based in the United States to buy, sell and hold digital assets through custodial wallets. The partnership will also enable card holders to earn and spend rewards in crypto rather than using loyalty points, accruing tokens or redeeming them for purchases.
“We’ll not only empower our partners to offer a dynamic mix of digital assets options, but also deliver differentiated and relevant consumer experiences,” said executive vice president for digital partnerships at Mastercard Sherri Haymond.
According to data from Colloquy Loyalty Census research conducted in 2017, U.S. consumers held 3.8 billion memberships in loyalty programs, though these numbers have likely changed following the evolving financial landscape amid the pandemic. Mastercard also reported there were 249 million of its cards in the United States as of the end of Q1 2021. Millions of loyalty rewards program users who may have never had any knowledge or use of cryptocurrencies could soon have some exposure.
Mastercard CEO Michael Miebach said in July the company “[has] to be in this space” in part due to the growing interest around central bank digital currencies and crypto. In February, the credit card firm announced its roughly one billion users would be able to use crypto at its more than 30 million supported merchants. However, Mastercard has not yet clarified which tokens would be supported.
The digital assets management arm of the Intercontinental Exchange, Bakkt recently listed its shares on the New York Stock Exchange under the ticker symbols BKKT and BKKT WS. The platform has also partnered with Google to allow customers to convert their crypto balances to make fiat payments using Google Pay.
Crypto Is Here To Stay, Says Paytm Founder Amid Regulatory Debate In India
The government of India is set to propose a new crypto bill in Parliament. This bill contains some regulations that are unfavorable to India’s cryptocurrency economy. In the midst of this, Vijay Shekhar Sharma, the founder of Paytm, has a lot to say. Paytm is an Indian multinational technology company that specializes in digital payment systems, e-commerce, and finance.
Sharma proclaimed that crypto is here to stay, and he expects it to become mainstream in a few years.
Crypto Will Become Mainstream In 5 Years
On Thursday, at a virtual conference organized by the Indian Chamber of Commerce (ICC), Sharma spoke about cryptocurrencies. He stated that crypto is Silicon Valley’s answer to Wall Street.
“I am very positive about crypto. It is fundamentally based on cryptography and will be the mainstream technology in a few years like the internet, which is (now) part of daily life,” he said.
In India currently, there are no laws that regulate crypto use. However, Prime Minister Narendra Modi recently held a meeting with other officials on the regulatory steps to take.
According to a parliamentary bulletin dated Nov. 23, the Indian government plans to introduce a new bill to regulate digital currencies. With this bill, the authorities are preparing to ban private cryptocurrencies. And at the same time, create a framework for developing an official digital currency. The bill, however, “allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Sharma further stated that cryptocurrency use is currently speculative. “Every government is confused. In five years, it will be the mainstream technology.” He claimed that people would soon realize how the world would be without crypto. However, he emphasized, it would not replace fiat currencies.
Total crypto market at $2.469 Trillion | Source: Crypto Total Market Cap from TradingView.com
The Paytm founder also said that he would expand to other countries once Paytm’s revenue crosses $1 billion.
“Now Paytm in a JV with a Japanese entity is running Japan’s largest payments system. Later we will go without a partner,” he said.
Paytm Considers Offering Bitcoin Services
Earlier this month, Paytm said that it would consider Bitcoin services if the Indian government legalized crypto. During an interview with Bloomberg, Paytm chief financial officer Madhur Deora spoke about the unclear cryptocurrency laws in India.
“Bitcoin is still in a regulatory grey area if not a regulatory ban in India. […] At the moment, Paytm does not do Bitcoin. If it was ever to become fully legal in the country then clearly there could be offerings we could launch.”
Facebook’s centralized metaverse a threat to the decentralized ecosystem?
Facebook has been planning its foray into the metaverse for some time now — possibly even several years. But it’s only recently that its ambitious expansion plans have catapulted the concept into mainstream headlines across the globe. Renaming the parent company to Meta was perhaps the biggest, boldest statement of intent the firm could make. Suddenly, major news outlets were awash with explainer articles, while finance websites have been bubbling with excitement about the investment opportunities in this newly emerging sector.
However, within the crypto sphere, the response has been understandably more muted. After all, decentralized versions of the metaverse have been in development around these parts for several years now. Even worse, the tech giants’ cavalier attitude to user privacy and data harvesting has informed many of the most cherished principles in the blockchain and crypto sector.
Nevertheless, metaverse tokens such as Decentraland (MANA) and Sandbox (SAND), enjoyed extensive rallies on the back of the news, and within a few days of Facebook’s announcement, decentralized metaverse project The Sandbox received $93 million in funding from investors, including Softbank.
But now that the dust has settled, do the company-formerly-known-as-Facebook’s plans represent good news for nonfungible token (NFT) and metaverse projects in crypto? Or does Meta have the potential to sink this still-nascent sector?
What is known so far?
Facebook hasn’t released many details about what can be expected from its version of the metaverse. A promotional video featuring the company co-founder and CEO Mark Zuckerberg, himself, along with his metaverse avatar, looked suitably glossy. Even so, it was scant with information about how things will actually work under the hood. However, based on precedent and what is known, some distinctions can be made between what Facebook is likely to be planning and the established decentralized metaverse projects.
Facebook has some form when it comes to questions over whether it will adopt decentralized infrastructure based on its efforts to launch a cryptocurrency. Diem, formerly Libra, is a currency run by a permissioned network of centralized companies. David Marcus, who heads up Diem, has also confirmed that the project, and by extension Facebook, is also considering NFTs integrated with Novi, the Diem-compatible wallet.
Based on all this, it’s fair to say that the Facebook metaverse would have an economy centered around the Diem currency, with NFT-based assets issued on the permissioned Diem network.
Announcing @Meta — the Facebook company’s new name. Meta is helping to build the metaverse, a place where we’ll play and connect in 3D. Welcome to the next chapter of social connection. pic.twitter.com/ywSJPLsCoD— Meta (@Meta) October 28, 2021
The biggest difference between Facebook’s metaverse, and crypto’s metaverse projects, is that the latter operates on open, permissionless, blockchain architecture. Any developer can come and build a metaverse application on an open blockchain, and any user can acquire their own virtual real estate and engage with virtual assets.
Critically, one of the biggest benefits of a decentralized, open architecture is that users can join and move around barrier-free between different metaverses. Interoperability protocols reduce friction between blockchains, allowing assets, including cryptocurrencies, stablecoins, utility tokens, NFTs, loyalty points, or anything else to be transferable across chains.
So the most crucial question regarding Facebook’s plans is around the extent to which the company plans for its metaverse to be interoperable, and metaverse assets to be fungible with other, non-Facebook issued assets.
From the standpoint of the decentralized metaverse, it doesn’t necessarily sound like great news. After all, Meta’s global user base dwarfs crypto’s. But there’s another way of looking at it, according to Robbie Ferguson, co-founder of Immutable, a layer two platform for NFTs:
“Even if [Meta] decides to pursue a closed ecosystem, it is still a fundamental core admission of the value that digital ownership provides — and the fact that the most valuable battleground of the future will be who owns the infrastructure of digital universes.”
Centralization could be the most limiting factor
Based on the fact that Diem is already a closed system, it seems likely that the Facebook metaverse will also be a closed ecosystem that won’t necessarily allow direct or easy interaction with decentralized metaverses. Such a “walled garden” approach would suit the company’s monopolistic tendencies but limit the potential for growth or Facebook-issued NFTs to attain any real-world value.
Furthermore, as Nick Rose Ntertsas CEO and founder of an NFT marketplace Ethernity Chain pointed out, users are becoming weary of Facebook’s centralized dominance. He added in a conversation with Cointelegraph:
“Amidst [the pandemic-fuelled digital] transition, crypto adoption rose five-fold. At the same time, public opinion polling worldwide shows growing distrust of centralized tech platforms, and more favorable ratings of the very nature of what crypto and blockchain offer in protecting privacy, enabling peer-to-peer transactions, and championing transparency and immutability.”
This point is even more pertinent when considering that the utility of Diem has been preemptively limited by regulators before it has even launched. Regardless of how Diem could eventually be used in a Facebook metaverse, regulators have made it clear that Diem isn’t welcome in the established financial system.
So it seems evident that a closed Facebook metaverse will be limited to the point that it will be a completely different value proposition to what the decentralized metaverse projects are trying to achieve.
Meanwhile, decentralized digital platforms are already building and thriving. Does that mean there’s a risk that blockchain-based platforms could fall prey to the same fate as Instagram and WhatsApp, and get swallowed up as part of a Meta acquisition spree? Sebastien Borget, co-founder and chief operating officer of the Sandbox, believes that decentralized projects can take a different approach:
“Typically, big tech sits on the sidelines while new entrants fight for relevance and market share — and then swoops in to buy one of the strongest players. But that strategy only works if startups sell. So there has to be a different economic incentive, which is exactly why Web 3.0 is so powerful. It aligns the platform and the users to build a platform that stands on its own, where users have ownership over its governance — and ultimate success.”
A metaverse operated by tech giants?
Rather than attempting to dominate, Facebook may decide to integrate with established metaverses, games and crypto financial protocols — a potentially far more disruptive scenario. It could be seriously transformative for the crypto space, given the scale of Facebook’s user base.
Therefore, could there be a scenario where someone can move NFT assets between a Facebook metaverse and a decentralized network of metaverses? Sell Facebook-issued NFT assets on a DEX? Import a $69 billion Beeple to the Facebook metaverse to exhibit in a virtual gallery?
This seems to be an unlikely scenario as it would entail substantial changes in mindset from Facebook. While it would create exponentially more economic opportunity, regulatory concerns, risk assessments, and Facebook’s historical attitude to consuming competitors rather than playing alongside them are likely to be significant blockers.
The most likely outcome seems to be that Facebook will attempt to play with established centralized tech and finance firms to bring value into its metaverse. Microsoft has already announced its own foray into the metaverse, but perhaps not as a direct competitor to what Facebook is attempting to achieve. Microsoft’s metaverse is focused on enhancing the “Teams” experience in comparison to Facebook’s VR-centric approach.
But it seems more plausible that the two firms would offer some kind of integration between their metaverse platforms than either of them would rush to partner with decentralized, open-source competitors. After all, Facebook’s original attempt to launch Libra involved other big tech and finance firms.
Make hay while the sun shines
Just as Libra created a lot of hype, which ultimately became muted by regulators, it seems likely that the development of a Facebook metaverse can play out in the same way with regards to its impact on the cryptocurrency sector.
Regulators will limit Facebook’s ability to get involved with money or finance, and the company isn’t likely to develop a sudden desire for open-source, decentralized, solutions.
However, the one positive boost that Libra brought to crypto was publicity. Ntertsas believes that this, alone, is enough to provide a boost to the decentralized NFT sector, explaining:
“Meta’s plans will enable a surge in utility for NFT issuers and minters. NFTs can then be used as metaverse goods — from wearables to art, to collectibles, and even status symbols — there is an infinite use case and utility to NFTs and what they can become in the ever-growing NFT ecosystem.”
In this respect, there are plenty of opportunities for decentralized metaverse projects to muscle into the limelight with their own offerings and showcase how decentralized solutions are already delivering what Facebook is still developing. Borget urges the community to seize the moment:
“Now is the time for us to double down on building our vision of the open, decentralized and user-driven metaverse. We also have to invest time and money in explaining the benefits of our vision over what the Facebooks of the world have offered thus far.”
Chinese ignore government restrictions and are using crypto to send money to Japan
As the Chinese government continues to fight cryptocurrencies, officials have discovered how the country’s citizens use the technology to bypass government restrictions and send money out of the country.
As the Chinese government recently announced, many citizens are using cryptocurrencies to send money abroad, especially to neighboring Japan.
This time, the discovery of significant international transactions from China to Japan was made by Japanese regulators.
In the course of an investigation, it was discovered that the Chinese were remitting funds to Japan using cryptocurrencies. Then they converted these funds into Japanese yen.
According to the Chinese government, the discovery came during a Japanese investigation into corporate funds flows. Japan’s National Tax Agency found a channel through a Japanese photography company.
The company opened a bank account primarily focused on alleged Chinese customers. However, he used it as a cover to send Chinese money to Japan.
The company was found to have transacted up to 27 billion yen, equivalent to $235 million in 3 years. In addition, part of the assets was invested in real estate and other products as a way to hide the money.
In what the government called a classic case of money laundering, three were identified. They acted as intermediaries for some Chinese tycoons looking to invest in Japan.
Regulations in China do not allow citizens to exceed the remittance volume of $50,000 per person per year. Any need to exceed this limit requires a proper audit. In addition, the process goes through relevant agencies for proper reporting.
These investors, who were indicted for secretly sending money to Japan, simply exploited the anonymity of transactions made possible by cryptocurrencies.
The government used the case to reinforce its stance on banning cryptocurrency activities.
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