U.S. payment giants Visa and Mastercard are slamming the brakes on plans to forge new partnerships with crypto firms after a string of high-profile collapses shook faith in the industry, people familiar with the matter told Reuters.
The crypto industry saw a stunning reversal of fortunes in 2022 as bankruptcies of industry majors FTX and BlockFi rattled investors and increased regulatory scrutiny on the sector.
Both Visa and Mastercard have decided to push back the launch of certain products and services related to crypto until market conditions and the regulatory environment improve, said the people, who asked not to be named as talks were confidential.
“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,” a spokesperson for Visa, the world’s largest payment processor, said.
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That does not change the company’s crypto strategy and focus, however, the spokesperson added.
A spokesperson for Mastercard said, “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.”
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Over the past couple of years, major credit card firms had warmed up to crypto as the popularity of the asset class exploded, with some touting it as the next big thing in finance.
Card companies, which pocket a small percentage of the dollar value of transactions they process, had announced multiple partnerships with crypto firms and put in place dedicated teams to explore blockchain technology.
Mastercard teamed up with crypto lender Nexo in April to launch what it called the world’s first “crypto-backed” payment card.
In November, Visa severed its global credit card agreements with FTX, just a month after announcing an expanded partnership with the exchange.
Credit card company American Express said in 2021 it would consider using crypto as a possible option to redeem reward points in the future.
However, it is not viewing crypto tokens as a strategic priority in the near-term, a source familiar with the matter said.
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“In the near-term, we don’t see crypto replacing our core payment and lending services,” an AmEx spokesperson said in an emailed statement, adding that the company continues to explore meaningful use cases for the technology.
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“They cannot and should not move ahead until there is a clear regulatory framework,” said Thomas Hayes, chairman and managing member at investment firm Great Hill Capital.
“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.”
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