MasterCard has finally dipped a toe in the crypto-currency pool, joining a host of other big name investors backing new bitcoin incubator Digital Currency Group (DCG).
MasterCard was joined by Canadian bank CIBC, insurer New York Life and venture capital firms TransAmerica Ventures and Bain Capital Ventures in DCG's funding round.
“MasterCard has invested in DCG for the first-time," a MasterCard spokesperson told Finextra. "We believe they’re well placed to assess technologies in the digital currency and blockchain spaces.”
The investment suggests a change in strategy for MasterCard. In November 2014 it stated in a submission to the UK Treasury that the risks presented by digital currencies far outweigh the benefits. MasterCard was also sceptical of claims that digital currencies have low transaction costs.
"We would argue that, when compared to MasterCard's network, the claims pertaining to the speed and safety of digital currencies [do] not hold up, not least given that on average it takes 10 minutes for a block to be verified and that digital currencies are far more susceptible to hacking attacks."
The DCG is led by Barry Sibbert, whose first company, the SaaS investment platform SecondMarket, was recently acquired by Nasdaq Private Market. It claims to be one of the largest investment portfolios in digital currencies having backed 57 companies in 18 countries to date.
While Sibbert has welcomed the addition of the new investors, praising their long-term perspective and organisational and intellectual capital, he has also warned that any investment in digital currencies will take time to produce returns.
"We are still far away from Bitcoin being a functional currency and I don’t think we’ve gotten closer lately. First it’s going to function as a speculative investment that will drive up the price and create a larger monetary base that will draw in Wall Street to trade it. Then more merchants will come on board. As it gets more liquid, as a [payment] rail it will become a real alternative to the existing money transfer systems in the world today.”