Do not expect MasterCard (NYSE: MA) products to work with cryptocurrencies like Bitcoin or DASH anytime soon. The company’s president and CEO is totally hostile to them.
“Non-government mandated currency is junk,” Ajay Banga told The Economic Times on 7 October. This might explain why MasterCard pulled the plug on cryptocurrency debit cards outside of Europe.
MasterCard will stop supporting cryptocurrency debit cards outside the European Economic Area soon, The Merkle reported on 12 October. Visa already took such action, cryptocurrency Visas including that from TenX were scheduled to shut down on Monday, October 16.
MasterCard is open to Government Cryptocurrency
“The government-mandated digital currencies are interesting,” Banga said. He did not identify any government-mandated cryptocurrencies.
One has to wonder if Mr. Banga has knowledge we do not. Perhaps he has seen some government plans we do not know about. This may mean that MasterCard is open to working with some Ethereum altcoins as long as they are government-approved.
Notice Banga said government-mandated, which means he might accept a private cryptocurrency that has a government’s seal of approval. This means MasterCard might be open to working with China’s NEO or Russia’s Waves; both of which seem to have indirect government backing. Crypto users should beware because Banga might also be aware of plans for some sort of crackdown.
“If the government creates digital currency, we will find a way to be in the game,” Banga said. “We will provide rails for moving currency from customer to merchant.”
MasterCard CEO has a good Point about Crypto
Banga also raised a couple of very good points about altcoins that a lot of cryptocurrency geeks will not want to hear.
“Any currency needs stability and transparency, otherwise you will get all the illegal activities in the world,” Banga said. He’s absolutely right about that. This statement also points to a fundamental flaw in some cryptocurrencies, and many fiat currencies, they lack neither transparency nor stability.
He also noted a major problem with Bitcoin – nobody knows what it’s really worth. Banga does not know, neither does Jamie Dimon, nor any cryptocurrency deek. That’s great for speculators and very bad for people who need a stable payment mechanism.
“If I pay for a bottle of water in Bitcoin, one day it is two bottles for a Bitcoin the other day it is 9,000 bottles,” Banga complained. “This does not work.”
MasterCard CEO thinks Digitalization of Indian Currency Might Not Work
Banga also had some bad news for India’s Prime Minister Narendra Modi. He thinks that Modi’s ambitious plan to digitalize India’s currency; which included declaring the two largest Rupee notes worthless, might not be working.
MasterCard’s usage in India doubled and tripled after Modi’s action on November 8, 2016, but has now slowed, Banga noted. He noted that cash is a substantial part of the economy.
Digitalization will not work in India because 80% of the country’s nonagricultural workforce is informally employed which means they are paid by cash, Banga noted. He believes the only way India’s economy can grow is through expansion of manufacturing and tourism.
“We have the growth in labor but not in productivity — which has to change,” Banga said. He also expressed some doubts in Modi’s methodology.
“If you want digitization — whether it is a card, phone or fingerprint — you cannot get that by a fiat,” Banga said. “You have to encourage and incentivize both the customer and the merchant.”
Such incentives would include tax changes, Banga noted. He also admitted that change will be tough and painful.
“All reform, by the nature of the word, is disruptive,” Banga pointed out. It looks as if India might not be ready for digital currency unfortunately; Modi thinks it is, which might lead to disaster if Banga is correct.
The age of digital currency might not be here, even the CEO and President of MasterCard; a guy who should know has serious doubts. That means it might take a lot of pain, blood, sweat, and tears to make a digital economy a reality.