Mastercard will upgrade its crypto card so its clients can make purchases using stablecoins, as well as a range of traditional cryptocurrencies, to promote the kind of token they say will help grow economic activity.
The payments company said in a press release on Tuesday it would upgrade its existing crypto card payment program that launched in February this year with the help of a series of fintech firms.
“Today, not all crypto companies have the foundational infrastructure to convert cryptocurrency to traditional fiat currency, and we’re making it easier,” Mastercard’s Raj Dhamodharan, who is executive vice president of digital asset and blockchain products, said in a statement.
Stablecoins are privately issued cryptocurrencies that are backed by an underlying asset, such as the US dollar, or even short-dated government bonds. This peg helps remove some of the volatility that can deter more risk-averse crypto users.
Tether, the largest stablecoin by market capitalization, is much less volatile than bitcoin. It has barely changed in value over the last year, declining by 0.1%, compared to bitcoin, which has risen by 220% in this same time.
Mastercard has said previously it is also committed to helping central banks shape and develop their own digital currencies (CBDCs), which are digital tokens like cryptocurrencies, but are not decentralized.
Blockchain firm Evolve Bank & Trust and Paxos Trust and Circle are some of the companies that Mastercard said it was talking to about the stablecoin program, along with bitcoin payments firm BitPay and cloud firm Uphold.
“BitPay believes the future of payments is on the blockchain because it transforms how consumers send, receive, and store money around the world,” Stephen Pair, co-founder and CEO of BitPay.
The Pershing Square Capital Management boss was browsing Twitter last December when he came across “The Children of Pornhub,” a damning indictment of the porn site by The New York Times columnist Nicholas Kristof. The article detailed how Pornhub allowed unverified users to upload videos without authorization from the people featured in them, enabling revenge porn and other exploitation.
Ackman noted in Kristof’s story that Mastercard and Visa processed payments for Pornhub. The hedge fund manager, who has waged activist-shareholder campaigns against several companies, realized he could leverage his influence to push those publicly listed payment groups to make changes.
Unaware that American Express already banned payments on porn sites, he texted Mastercard CEO Ajay Banga a link to the story and the following message: “Amex, VISA and MasterCard should immediately withhold payments or withdraw until this is fixed. PayPal has already done so.”
Banga swiftly replied, “We’re on it,” according to Institutional Investor.
Days later, Mastercard announced it had instructed its partners who connected Pornhub to its payment network to cease accepting the site’s charges. The payments group had found evidence of illegal activity and was continuing its investigation, it said.
Visa promptly cut ties with Pornhub too and launched an investigation. The porn site declared less than 24 hours later that it had removed 10 million videos, or 80% of all the videos on its site.
MindGeek didn’t immediately respond to a request for comment from Insider.
Pornhub-owner MindGeek was already under pressure from human rights activists such as Laila Mickelwait, while litigator Michael Bowe was signaling to the credit-card companies that lawsuits might be on the way, Institutional Investor said.
However, Ackman’s text to Banga and his tweets about the issue may have tipped the balance. “It wasn’t until Bill really laid on the pressure and said, ‘Do the right thing,’ that they did,” Mickelwait told the publication.
The billionaire’s key takeaway from the episode was that investors can influence companies to act more responsibly, especially now that environmental, social, and governance (ESG) standards are gaining momentum. “CEOs get a zillion emails, but the one group that rises to the top of the line … is its biggest shareholders, influential shareholders,” he told Institutional Investor.
The problem, which only lasted a few hours, can be traced to a backend system operated by just four companies that underpins much of the payments ecosystem. Most consumers know little to nothing about it.
When customers slip their debit or credit cards into a machine at a business, a little phrase pops up: “authorizing payment.” Those two words reference an elaborate system that allows the multi-billion dollar payments processing industry to approve the charge for the customer.
It sounds simple, but each processor – the companies that handle every card payment by communicating between the merchant and customer’s respective banks – must use an elaborate system of backups to keep the consumer economy running each day, preventing an outage that would leave many merchants scrambling to not lose sales from consumers who increasingly don’t carry cash.
On top of that, they’re pounded by hacking attempts from criminals wanting to steal payment information, meaning their cybersecurity must be top notch.
But in their most simplistic form, “you can think of them as being these huge data center-based companies that are processing billions upon billions of transactions, 24/7, 365,” said Lisa Ellis, an analyst at MoffettNathanson.
On Feb. 26, when Fiserv, one of those payments processors had an internet outage, merchants across the US couldn’t take electronic transactions until the issue resolved. The company services to a majority of fast-food restaurants, which explains why Chick-fil-A, McDonald’s, and Popeye’s were some of the businesses affected that day.
Fiserv, alongside FIS, Global Payments, and JPMorgan Chase, account for about 80% to 90% of the payments processing industry in the US, according to MoffetNathanson. That means each time you swipe your card, there’s about a 90% chance one of those businesses is responsible approving the payment.
A case of an “outage,” in which many merchants can’t process card payments, is extremely rare, according to Ellis and Robert Le, an analyst at PitchBook. That’s because the processors have backups for every single part of the process.
“The IT infrastructure of any large company has a whole backup plan to it,” Ellis said. It’s “a business continuity plan that says, ‘OK what’s the redundancy that’s built in here in case something goes down?'”
Payments processors have backup internet providers and backup data centers that process payments in case one data center goes down. If a card is taking longer than normal to authorize, it might be because the payment is being routed to a data center farther away.
A spokesperson for FIS told Insider the company has heavily invested in its infrastructure “to minimize the likelihood and impact of an outage.” It regularly tests backups, like its “auto failover” that allows payments to move between data centers as needed, they said.
Global Payments didn’t respond to Insider’s request for comment, and a representative from JPMorgan Chase declined to discuss company operations and cybersecurity measures.
As for Fiserv, which had the issues in February, a company spokesperson said: “Redundancy and resiliency are built into our solutions.” That includes multiple internet service providers and data center backups across the country, they said.
In February, despite the hours-long wait many merchants had in being able to once again accept digital payments, Cave said Fiserv’s internet backups worked as intended. She added that, “the initial internet service provider outage created a secondary impact for some clients.”
A widespread, long-term outage at a payments processor is “very rare,” Le, the Pitchbook analyst, said.
So rare, in fact, that when Visa, a payments provider that works with the processors, had an outage in Europe in September 2018, people thought it might have been a terrorist attack, Ellis said. More than 5 million transactions failed over the 10-hour outage because of a rare data center malfunction, Finextra reported at the time.
“People were freaking out,” Ellis said, “because it’s so unusual.”
Though the Visa outage was a data malfunction, payments processors and others in the network must be on top of cybersecurity to prevent service problems related to a hacking. They’re “bombarded constantly with cybersecurity attacking attempts” because criminals are wanting to get payment information, Ellis said.
“Aside from military agencies and stuff like that, they’ve got to be some of the most attacked networks in the world because they contain payment information,” she said.
Outages, though rare, likely affect merchants the most, considering the lost sales and damage to the brand reputation with customers, according to Le.
“Consumers nowadays don’t carry any cash,” Ellis said. “So if you were in a store buying anything of a reasonable size and you couldn’t use a card, most consumers would just walk out.”
Over the years, cash has become less widely used as card payments have taken over. Card penetration, or the number of consumers using a card instead of cash, is about 60% to 70%, according to Ellis, but that varies across the country. In New York City, for example, card usage is even higher.
If there was a big outage at a payments processor in the future, it could “lead to a call to bring cash use back into the system,” Le said. But in the long-term, merchants are likely to look for support from multiple payments processors, instead of just relying on one, he said.
Large businesses in the US usually do have multiple processors, so they have a backup in case one goes down. But smaller merchants generally don’t, Ellis said.
Amid the COVID-19 pandemic, cash increasingly became a thing of the past, as merchants sought to use more contactless payments to avoid exposure to the virus. And the future of payments is likely digital, as Insider Intelligence predicts they will continue to grow from 2023 and beyond.
Bitcoin had a momentous run in February, from catapulting to a market capitalization of $1 trillion to smashing the $58,000-mark.
The month also saw heavyweight institutions such as Tesla and Mastercard embrace the cryptocurrency, while MicroStrategy reinforced its support for bitcoin by adding to its existing pile.
In Febrauary, the price of bitcoin jumped more than 50%. As of Friday 4 pm ET, bitcoin was trading lower by 5.54% to $46,515, a 15% fall compared to Friday last week.
Yet, Pankaj Balani, CEO at cryptocurrency derivatives exchange Delta Exchange, said the case for a stronger rally in bitcoin remains intact despite the recent correction.
“This is only the second correction in bitcoin prices since November when bitcoin broke above its previous all-time high and started a fresh rally,” he said. “One can expect a short-term consolidation in the price of bitcoin around here.”
Balani noted that the $40,000 level has become a strong psychological support for the digital coin and will be difficult to break in the short term.
Paolo Ardoino, CTO of Bitfinex, a cryptocurrency exchange, said such price movements are to be expected in a nascent space. Ardoino foresees the same volatility in March but remains optimistic about the value of the asset.
“As we move into March and through 2021, bitcoin will continue to find its ground, and we will continue to experience fluctuations and volatility,” he said. “We should see more mainstream adoption, with the continued entrance of major traditional financial players onto the scene.”
Alex Zhao, CEO of Standard Hashrate Group, the project team behind the bitcoin Standard Hashrate Token, echoed the sentiment.
“Our members now share the prospect that bitcoin price will reach $100,000 before the end of 2021,” he said. “We generally foresee an abrupt rise in bitcoin price in March 2021. This is in large part due to the continued quantitative easing, particularly in the US. Hedge funds and corporations will continue to buy more bitcoin.”
Meanwhile, Jeffrey Wang, head of Americas for Amber Group, a cryptocurrency financial services firm, said he believes most bitcoin investors are in it for the long haul.
“I believe a lot of the earlier adopters that have held bitcoin for years aren’t looking to sell at levels near here but much higher, north of $100,000 if at all,” Wang said. “I look at the next major milestone to be $75,000 where there should be some resistance.”
Through its ups and downs, here is a quick look back at bitcoin’s record-breaking rally in February.
A European Central Bank governing council sounded an alarm for bitcoin investors. “If people want to invest in bitcoin, they have to be prepared to lose all their money – that’s certainly my view,” said Gabriel Makhlouf, a governing council member of the ECB.
Tesla announced it invested $1.5 billion in bitcoin, pushing the price up 16% to a record $44,795. Tesla also unveiled plans to accept the cryptocurrency as payment in the near future.
Bitcoin soared above $48,000 for the first time, riding the rally sparked by the Tesla announcement.
The ECB’s Christine Lagarde said she does not consider bitcoin a real currency and will not be holding it as reserve currency anytime soon. “It’s very unlikely – I would say it’s out of the question,” Lagarde said.
US Treasury Secretary Janet Yellen also criticized bitcoin. “I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” she said.
Bitcoin surged to an intraday high of $48,364 following continued buy-in from major players. It was the second time the world’s most popular cryptocurrency blew past the $48,000-mark in one week.
Elon Musk posted a vague tweet with an image of a ring with the logo of bitcoin earlier in the day.
Twitter CEO and a longtime bitcoin advocate Jack Dorsey announced a partnership with Jay-Z to start a bitcoin endowment that will focus on developing the cryptocurrency in India and Africa. “It’ll be set up as a blind irrevocable trust, taking zero direction from us,” Dorsey said.
On the same day, Andrew Yang said he would make New York City a hub for bitcoin if elected mayor. “As mayor of NYC – the world’s financial capital – I would invest in making the city a hub for BTC and other cryptocurrencies,” the former presidential candidate said in a tweet.
BitPay floated the possibility of its bitcoin cards being added to their Apple Wallet, giving cryptocurrency holders a new way to spend via Apple Pay. “We have thousands of BitPay Wallet app customers using the BitPay Card who are always looking for new places and ways to spend their crypto,” said Stephen Pair, CEO of BitPay.
Bitcoin jumped above $50,000 for the first time, bringing its year-to-date gain to 74%. The cryptocurrency rose nearly 5%, to $50,547.
Bitcoin hit another record high, climbing above $51,700 for the first time and bringing its market capitalization close to $1 trillion.
MicroStrategy increased its convertible debt offering from $600 million to $1 billion. The software technology company owned nearly 71,000 bitcoin to date since it began purchasing bitcoin last summer.
Bitcoin continued its rally to just above $52,600.
Later in the day, payments company Square announced it bought more bitcoin, adding 3,318 coins at an aggregate purchase price of $170 million. The payments company now owns 8,027 bitcoins, representing about 5% of its total cash.
Bitcoin’s rally continues, as the token touched a new 24-hour record high late Thursday before paring gains on Friday.
The popular cryptocurrency rose 4% to a new 24-hour high of 48,929.36 at 7:08PM E.T. Thursday evening.
Institutional backing from industry giants including Tesla, Mastercard, and Bank of New York Mellon has fueled the cryptocurrency’s surge, which broke one record after another in just the last week. In other developments, Andrew Yang on Thursday said he will transform New York City into a hub of cryptocurrencies if elected as mayor.
The price of bitcoin has swung wildly in the past months climbing from around $19,000 in December to its current price approaching $50,000.
“Yes, [bitcoin] has risks but where there are risks, there are definitely also opportunities,” Julius de Kempenaer, senior technical analyst at StockCharts told Insider. “But for those who know what they are doing, have proper risk management in place, can handle the stress, and can afford the potential losses – give it a go.”
BNY Mellon on Thursday said it is exploring how to allow cryptocurrency assets to pass through the same financial network it uses for more traditional holdings such as stocks and bonds, the Wall Street Journal first reported.
Bitcoin – which is not regulated by any central authority – has risen more than 60% since the start of this year, lifted by increasing demand from institutions, celebrities, and large investors.
The token, however, has faced scrutiny from policymakers and regulators as the price continues to skyrocket. US Treasury Secretary Janet Yellen on Wednesday called the “misuse of cryptocurrencies” a growing problem.
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” Yellen said.
The popular pornography website Pornhub is deleting all unverified content on its platform, the company announced on Monday.
“As part of our policy to ban unverified uploaders, we have now also suspended all previously uploaded content that was not created by content partners or members of the Model Program,” the company said.
It’s the latest response from Pornhub following a New York Times column that accused the company of hosting child pornography and other illegal content, like videos filmed without the consent of those featured.
“As part of our policy to ban unverified uploaders, we have now also suspended all previously uploaded content that was not created by content partners or members of the Model Program,” the company said in a blog post on Monday morning. “This means every piece of Pornhub content is from verified uploaders, a requirement that platforms like Facebook, Instagram, TikTok, YouTube, Snapchat and Twitter have yet to institute.”
The company did not confirm how many videos were removed from the site, but Motherboard, which first reported the news, notes that the number of videos visible on Pornhub’s search function went from 13.5 million to 4.7 million on Monday morning.
Pornhub previously operated like YouTube, but with a focus on pornography, where anyone could upload a video to the service.
In a column written by Nicholas Kristof in the New York Times, Kristof described videos on Pornhub that he said were recordings of assaults on unconscious women and girls.
“The issue is not pornography but rape. Let’s agree that promoting assaults on children or on anyone without consent is unconscionable,” Kristof wrote on December 4.
Pornhub and its parent company Mindgeek have denied the allegations in the Times. The company told Business Insider it employs a “vast team of human moderators” who manually review “every single upload,” as well as automated detection technologies. It did not say how many people were part of its review team.
“Pornhub has actively worked to employ extensive measures to protect the platform from such content,” a Pornhub representative told Business Insider. “These measures include a vast team of human moderators dedicated to manually reviewing every single upload, a thorough system for flagging, reviewing and removing illegal material, robust parental controls, and a variety of automated detection technologies.” Those technologies, it said, include tools created by YouTube, Google, and Microsoft that are intended to combat child pornography and sexual abuse imagery.
Following the Times report, Pornhub announced stricter guidelines on who can publish videos and what videos are allowed to be published: Only accounts which Pornhub verifies will be allowed to publish content. Monday’s announcement takes that one step further, and purges Pornhub of all previously unverified content.
It’s unclear how many videos are being deleted from the service, and representatives didn’t respond to a request for comment as of publishing.
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