Mastercard has patented a method to manage cryptocurrency “fractional reserves”. The big idea behind it seems to be that users will be able to pay with fiat on credit cards partly backed by crypto assets using a centralized system offering faster transaction conformation speeds.
Cryptocurrency “Fractional Reserves”
Credit card giant Mastercard (NYSE: MA) was granted a patent for a “Method and system for linkage of blockchain-based assets to fiat currency accounts.” A disclosure from the US Patent and Trademark Office explains it relates specifically to the use of centralized accounts to manage fractional reserves of fiat and blockchain currency updated via transaction messages corresponding to fiat- and blockchain-based payment transactions.
Explaining the need for the patent, the document states that, “blockchain currencies have seen increased usage over traditional fiat currencies by consumers who value anonymity and security. Cryptocurrencies offer consumers a currency that is decentralized and relatively anonymous and secure in its use.” And, such transactions “may be highly desirable for consumers that wish to maintain their privacy, and may help reduce the likelihood of fraud due to theft of their information.”
However, “it often takes a significant amount of time, around ten minutes, for a blockchain-based transaction to be processed, due to the computer processing time and resources required to verify and update the blockchain.” In addition, “it can be difficult for consumers to adopt, or even understand, blockchain currencies,” and if a “wallet is lost, discarded, or stolen, the associated currency often cannot be recovered by the rightful owner.” Thus it concludes that, “there is a need to improve on the storage and processing of transactions that utilize blockchain currencies.”
Mastercard to Really Incorporate Crypto?
Mastercard has already acquired a lot of cryptocurrency-related patents before this. However, it does not seem to be planning to utilize the technology as no actual product or service have been developed. Asked about this, Mastercard senior vice president Seth Eisen explained to CNBC that, “We’re consistently looking at ways to bring new thinking and new innovations to market to create value for us and our customers and cardholders. Patent applications are part of that process, taking steps to protect the company’s intellectual property, whether or not the idea ever comes to market.”
In fact, reports from earlier this year indicated that the company would only agree to facilitate fully-regulated, central bank-issued, non-anonymous coins. “If governments look to create national digital currency we’d be very happy to look at those in a more favorable way,” Ari Sarker, co-president of Mastercard’s Asia-Pacific business, said back in March. “So long as it’s backed by a regulator and the value …it is not anonymous, it is meeting all the regulatory requirements, I think that would be of greater interest for us to explore.”