Payment firms Visa (NYSE: V) and Mastercard (NYSE: MA) are reportedly taking a step back from forming new partnerships with cryptocurrency-focused companies. This, after the collapse of major businesses operating in the nascent industry.
As first reported by Reuters, the crypto-assets sector experienced somewhat of a reversal of positive developments last year as bankruptcies of FTX and BlockFi (among many others) shocked investors and increased regulatory oversight of the industry.
Now, Visa and Mastercard have made the decision to suspend the launch of products that may be related to crypto-assets until market conditions begin to substantially improve. This, according to sources cited by Reuters.
A Visa representative noted:
“Recent high-profile failures in the crypto sector are an important reminder that we have a long way to go before crypto becomes a part of mainstream payments and financial services.”
However, this may not materially change the firm’s crypto-related business strategy and focus, the representative clarified.
A Mastercard rep stated:
“Our efforts continue to focus on the underlying blockchain technology and how that can be applied to help address current pain points and build more efficient systems.”
During the past few years, large card companies had been increasingly focusing on the crypto space as the adoption of digital currency platforms had surged, with some claiming this was the next major innovative in finance.
Card firms, which receive a certain percentage of the monetary value of transfers they process, had unveiled several key partnerships with cryptocurrency service providers and had created special teams to explore the potential benefits of blockchain tech.
Mastercard has also partnered with crypto lending platform Nexo in order introduce a digital currency-backed payment card.
Last year, Visa had ended its credit card partnerships with FTX, which came only a month after the announcement of an expanded partnership with the firm.
Notably, card service provider American Express stated back in 2021 that it would look into using cryptocurrencies as a potential option to redeem reward points.
However, American Express is not considering such digital tokens as a key focus area for now, a source familiar with the matter told Reuters.
An AmEx rep noted:
“In the near-term, we don’t see crypto replacing our core payment and lending services.”
The representative also revealed that the firm is looking into various use-cases/applications of the technology.
Thomas Hayes, chairman and managing member at investment company Great Hill Capital, remarked:
“They cannot and should not move ahead until there is a clear regulatory framework. Delays are not attributable to their core business – as that remains strong. They are related to an uncertain regulatory environment for crypto and demand/interest for crypto services declining in the near term.”