Why your credit card company wants to give you crypto

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A laptop open on a table with a hand holding a credit card on one side and a hand holding a bitcoin representation in the other.
Mastercard is making it easier for credit card holders to earn rewards in bitcoin. | Velishchuk/iStock

Mastercard credit card holders can soon be rewarded with bitcoin. Huh?

Cryptocurrency was first created as an alternative to traditional financial institutions. Now, it’s gone mainstream enough that the more than 50-year-old credit card company Mastercard is offering its customers access to cryptocurrency digital wallets, cryptocurrency-branded debit and credit cards, and even cryptocurrency-based loyalty rewards programs. These tools are part of the partnership Mastercard announced on Monday with Bakkt, a platform for buying and selling digital assets like crypto.

Banks and financial institutions that offer Mastercard credit and debit cards can now enable customers to pay down their balance and earn loyalty points with bitcoin, the cryptocurrency that the Bakkt platform supports. As part of Mastercard’s agreement with Bakkt, merchants including restaurants and retailers will be able to offer bitcoin as an alternative to the traditional loyalty points that credit cards often offer users. At the same time, these Mastercard customers will have the option to convert rewards points they already have into bitcoin and store it in a Bakkt digital wallet.

This will give the holders of more than 2.8 billion Mastercards in circulation a potential on-ramp into the crypto investment world. While people who opt to convert or accumulate rewards points in crypto will still be taking a risk because cryptocurrency’s value is mostly determined by the volatile crypto market, Mastercard’s offerings will make taking that risk a little easier and less daunting than having to sign up separately for a crypto platform.

This isn’t Mastercard’s first cryptocurrency pursuit. There are already several Mastercard credit and debit cards for people who want to use cryptocurrency. Mastercard debit and prepaid cards offered by the platforms Uphold and BitPay allow people to quickly convert their cryptocurrency holdings into traditional currency, while a Mastercard credit card offered by the crypto company Gemini allows customers to earn rewards in cryptocurrency based on their spending activity.

In September, Mastercard also created its first-ever non-fungible token, or NFT, (an animated ball signed by soccer coach José Mourinho) as part of a credit card loyalty sweepstakes. Now, Mastercard’s decision to integrate support for bitcoin throughout its payments network means even more people will not just be exposed to cryptocurrency, but rewarded with it. Mastercard said this latest expansion will impact more than 20,000 financial institutions, including banks and credit unions, that work with the company.

More information about when these new capabilities will be available to customers will be shared at a later date, according to Mastercard.

“As brands and merchants look to appeal to younger consumers and their transaction preferences, these new offerings represent a unique opportunity to satisfy increasing demand for crypto, payment, and rewards flexibility,” Nancy Gordon, Bakkt’s vice president of rewards and payments, said in a statement.

The announcement comes as credit card companies have slowly let go of some of their apprehension about cryptocurrency and looked for ways to cash in on its growing popularity. In the first half of 2021, Visa customers spent more than $1 billion in cryptocurrency with credit cards that the company offers through partnerships with three different crypto platforms: Circle, BlockFi, and Coinbase. Other credit companies have signaled they could start offering cryptocurrencies soon, too. Late last year, American Express invested in a cryptocurrency trading platform called FalconX; around the same time, Discover Financial, which operates Discover Card, has begun to hire staff to build cryptocurrency capabilities too.

Credit card companies are just one example of traditional financial institutions making more room for regular people to acquire and use crypto. In April, Coinbase— a platform for buying and selling cryptocurrencies — became the first crypto company to go public — which effectively allows people to invest in cryptocurrency without having to actually buy any particular coin. Bakkt, the platform working with Mastercard, also went public earlier this month. And just last week, the first cryptocurrency-linked exchange-traded fund, or ETF, which is a basket of securities tied to the future price of bitcoin, began trading. Payment platforms like Paypal, Venmo (which is owned by Paypal), and Square all support cryptocurrency-based transactions, and Square is even considering building out a bitcoin mining business, which is a way of using lots of computing power to create new bitcoins.

Another sign that cryptocurrency is here to stay: growing investment in new fraud and security tech to keep track of cryptocurrency-based credit card scams and crimes. Unlike traditional currency, digital assets like bitcoin aren’t controlled or regulated by any one government, and their cryptography makes it much harder to track and reverse cryptocurrency-based transactions. Because of that, crypto is vulnerable to theft and embraced by money-launderers. Just days before announcing its cryptocurrency expansion, Mastercard bought CipherTrace, a cryptocurrency firm backed by the Department of Homeland Security that advertises itself as the “world’s first blockchain forensics team.” Paypal has also sought to hire cryptocurrency experts to focus on security issues like money laundering and counterterrorism.

Cryptocurrency has become so popular, including among criminals, that the US Marshals Service, the government branch that manages seized assets, hired a cryptocurrency bank to store all the seized cryptocurrency that it holds after criminal investigations. Those developments are a reminder that as credit card companies try to make these digital assets more popular among traditional credit card holders, cryptocurrency comes with risks.

Still, most cryptocurrency holders don’t seem to be complaining that some of the biggest financial services are slowly becoming more friendly to crypto. After all, it’s hard to ignore that the growing effort to mainstream cryptocurrency has had the convenient effect of boosting the value of the cryptocurrency investments they already have.