- Fractional reserve banking is the problem Bitcoin wanted to defeat
- The patent will track crypto assets and fiat assets concurrently
- MasterCard now sees a benefit to mixing crypto and fiat currencies
Like most financial institutions that first ignored the blockchain and cryptocurrencies, MasterCard now plans to join the fray and win. Fractional reserve banking is one of the main problems that the designers of Bitcoin wanted to defeat.
Jumping on the Crypto Bandwagon
In what experts believe could herald the 21 million Bitcoins as we have known them, MasterCard Inc. on Thursday, October 25, 2018, with application 20180308092 formally applied to patent a Fractional Reserve Cryptocurrency Bank.
The patent MasterCard is pursuing is a system that will track crypto assets and fiat assets concurrently. This is essentially a web wallet that will combine cryptocurrency and fiat currency accounts. The banker seems to have decided starting a Fractional Reserve to Cryptocurrency is the way to deal with Bitcoin’s scarcity.
At the Genesis of the blockchain, most financial institutions noted blockchain but were never prepared for the disruption it had the potential of and will still cause.
This explains the earlier negative reactions towards the distributed ledger technology (DLT). It appears like all this time MasterCard was studying the technology and looking for the best ways to use cryptocurrencies and hasten the process of making them legal tender. The patent describes a cryptocurrency credit card network and reads in part:
“Accordingly, the use of traditional payment networks and payment systems technologies in combination with blockchain currencies may provide consumers and merchants the benefits of the decentralized blockchain while still maintaining the security of account information and provide a strong defense against fraud and theft.”
That MasterCard is seeking a patent for Fractional Reserve Management for blockchain assets is an irony because the group initially associated cryptocurrencies with crime. What is laughable is the choice of the tool they want to use because the designers of Bitcoin intended to solve the problems associated with Fractional Reserve banking and it is a practice the crypto enthusiasts would want to see exterminated. Bitcoiners detest a debt-based economy currency and, they regard digital currencies as sound money.
Cryptocurrency exchanges have had issues with users over the users because crypto owners don’t hold the keys and for most people not holding the keys is equivalent to not holding your coin. MasterCard, an expert in transaction processing, now sees a benefit to mixing crypto and fiat currencies through the system they seek to patent so they can include their existing products and payment networks. The company states:
“Transactions that may be performed via a payment network may include product or service purchases, credit purchases, debit transactions, fund transfers, account withdrawals, etc. Payment networks may be configured to perform transactions via cash-substitutes, which may include payment cards, letters of credit, checks, transaction accounts, etc.”