Mastercard seeks role as bridge to facilitate cross-border use of China’s digital yuan
- The payments giant is in talks with various central banks, including China’s, to explore wider cross-border usage of their digital currencies
- In China, Mastercard is awaiting final approval for licences to start onshore card business, said Asia-Pacific co-president
It is already happening in the Bahamas. The Caribbean island chain’s central bank is one of the world’s first to issue a digital sovereign currency, called the Bahamas Sand dollar. Travellers to the country can readily convert their fiat currencies through a prepaid card on Mastercard’s network.
The prepaid card is linked to a digital wallet where the Sand dollars are issued, said Ling Hai, who prefers to go by both his names.
“While central banks can address their domestic issues associated with digital sovereign currencies, the role we can always play is on interoperability when the payment goes beyond a country’s borders,” said Ling Hai. “For us, supporting a central bank digital currency is similar to adding another fiat currency onto our network.”
US Federal Reserve chair Jerome Powell has already said China’s digital currency “is not one that would work here”.
Geopolitical obstacles aside, “conversion across a hybrid of both fiat and digital currencies could hold the key to broadening merchants’ acceptance of central bank digital currencies” said Ling Hai.
Extending the experience of the Bahamas Sand dollar, in the future a Hong Kong resident with a prepaid card could convert their Hong Kong dollars into digital yuan and reduce the need for currency conversion when travelling within the bay area.
At the wholesale level, Mastercard has been using blockchain technology to enable buyers to track the provenance of food supplies, so that the digital identity of produce such as avocado, beef and abalone can be validated across the entire supply chain, according to Sandeep Malhotra, executive vice-president for products and innovation, Asia-Pacific.
“In global trade finance, the use of blockchain is not just limited to payment. Our private blockchain technology is also supporting data exchange, contract validation, and authenticity validation of goods traded,” Malhotra said.
Last year, Mastercard’s joint venture in China won in-principle approval from the central bank to conduct bank card clearing in the vast onshore market. It was given one year to prepare for launch.
Ling Hai said the joint venture is working with regulators to obtain the licences required to start the business.
“Once we get the licence, our priority is to help people understand that our brand is also synonymous with the domestic Chinese market,” he said.
In China, state-backed UnionPay is the dominant player in the country’s card market with over 90 per cent share. Outside China, UnionPay cards are issued in 70 countries and regions.