Why Is MasterCard Investigating Digital Currencies like Bitcoin?
From Capitol Hill to the United Kingdom Bitcoin Comes Under Fire
Federal records indicate that MasterCard has been paying lobbyists to focus attention on
Bitcoin. The disclosure records were released by Peck Madigan Jones, a lobbying company. MasterCard has contracted the firm to begin lobbying against mobile payments and Bitcoin, with many other issues close in tow.
By taking the initiative, MasterCard has become the first company to lobby against Bitcoin and it appears to be doing so for the purposes of getting information to understand all pertinent policy issues about anonymous and virtual currencies.
Bitcoin has ruffled MasterCard’s feathers with its work on a debit card that operates on Visa and MasterCard networks. For its part, MasterCard has denied any knowledge of any working partnership with Xapo, the Bitcoin company. Virtual currencies remain
highly contentious on Capitol Hill, with some lawmakers eager to embrace them while others remain vehemently opposed to them.
Why Bitcoin is viewed with Suspicion
The anonymity of Bitcoin is one of the main reasons why it is viewed negatively by lawmakers. By dint of this characteristic, money launderers, drug dealers and criminal syndicates can potentially abuse Bitcoin systems.
But there are proponents of virtual currencies who argue that it is just as safe as cash, and it has the potential to completely change the way that payments are made. The cost effectiveness of Bitcoin payments makes them a viable alternative to credit cards
like MasterCard which charge exceedingly high fees.
Congress has resisted efforts at passing legislation on the use of virtual currency. The
Internal Revenue Service (IRS) treats virtual currency as property and not as currency. And the FEC (Federal Election Commission) is presently considering proposals to accept virtual
MasterCard and Bitcoin in the United Kingdom
A recent report by Quartz Virtual Currency has revealed that MasterCard has been lobbying the government of the United Kingdom for more regulation. MasterCard has made no bones about how threatened its business model is by virtual currencies such as Bitcoin.
Recently, the U.K. Treasury requested information on virtual currency like Bitcoin, from companies in the financial sector.
MasterCard responded to this call and indicated that the time it takes for a block to be verified is ten minutes or more and that virtual currencies are more vulnerable to attacks from hackers. The gist of MasterCard’s argument is that the benefits of virtual
currencies are far fewer than the risks.
The Future of Bitcoin
In 2014 there were 1.3 million Bitcoin users. By 2019 it is expected that the number of Bitcoin users will spike to 4.3 million. According to the Digital Currency Council an estimated 1,000 merchants per week accept Bitcoin. Even companies like PayPal, Alibaba,
Visa, MasterCard, Facebook and
Apple are working on ways of bringing virtual currency to people.
- The popularity and acceptance of Bitcoin and other virtual currency will only come to pass when enough people have accepted it
- Taxation and regulation of virtual currencies are the biggest hindrances for merchants
- Bitcoin tends to have wild fluctuations in price and this makes merchants somewhat nervous
- In the five years since Bitcoin and other virtual currencies arrived on the scene almost half of all these exchanges have gone bankrupt
The future of virtual currencies is uncertain at best. It is clear that if lawmakers move on legislation, merchants will swarm to adopt this new form of payments processing in spite of objections to the contrary from MasterCard and other vested interests.