Mastercard is making it even easier for customers and merchants to use cryptocurrency in their day-to-day lives. The payment giant just announced a partnership with digital asset platform Bakkt that will allow all merchants on its network to accept crypto payments.
On top of that, Mastercard customers will be able to buy, sell, and hold crypto using Bakkt’s custodial wallets. We’ll also see the launch of branded crypto credit and debit cards.
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Breaking down the crypto deal
Mastercard and Bakkt announced the partnership at this week’s Money 20/20 conference, a global gathering of the fintech industry.
Together, merchants and banks on the Mastercard network will be able to access Crypto-as-a-Service, giving quick access to crypto capabilities. In addition to enabling crypto payments, Mastercard will make crypto a part of its loyalty programs. Mastercard partners will be able to offer crypto rewards and customers will be able to use crypto rewards instead of normal loyalty points.
A whopping 77% of millennials are interested in learning more about cryptocurrency, and 75% would use crypto if they understood it better, according to a Mastercard survey. Part of the thinking behind these new crypto products is to appeal to some of those millennials.
“As brands and merchants look to appeal to younger consumers and their transaction preferences, these new offerings represent a unique opportunity to satisfy increasing demand for crypto, payment and rewards flexibility,” said Nancy Gordon, EVP, Loyalty Rewards & Payments at Bakkt.
Should you pay with crypto?
It is increasingly easy to pay with crypto, whether it’s through a crypto debit or credit card, directly with the service provider, or through a third party app. The world’s first cryptocurrency, Bitcoin (BTC), was intended to be a form of digital payment. It’s not surprising that as crypto grows, crypto payments are catching on.
However, if you want to pay with crypto, there are a few factors to consider.
1. Tax implications
The IRS does not view cryptocurrency as a currency, which means you’ll owe capital gains tax on any profits you make from your crypto assets. You need to keep track of every time you sell, trade, or spend your cryptocurrency, and pay capital gains taxes on any profits.
For example, if you bought $50 worth of BTC a year ago and you used it to buy $250 worth of groceries today, you’d owe taxes on the $200 profit. If you’re making a lot of crypto transactions, this record keeping could prove particularly troublesome.
2. Volatility
Bitcoin is a volatile asset — the price can rise or fall dramatically in a single week — which makes it difficult to use to pay for your weekly groceries or morning coffee. Let’s say you bought a shirt worth $50 using Bitcoin on Oct. 15. It would have cost about 0.00087 BTC, according to CoinMarketCap data. On Oct. 20, that same Bitcoin would have been worth $57 — 14% more.
That’s why many people view Bitcoin as an investment or store of value, rather than a payment type. Other cryptocurrencies such as Stellar Lumens (XLM) or Bitcoin Cash (BCH) are specifically designed for spending, which means the transaction fees are a fraction of a dollar and the processing times are much faster than Bitcoin. But even these can be volatile.
3. Consumer protections
Cryptocurrency payments are especially popular in the travel industry. One reason is that crypto payments can make it easier to avoid international fees and poor exchange rates. A number of travel agencies now allow travelers to book flights and hotels using cryptocurrencies.
However, this also highlights another reason for caution. When you book a flight using a travel rewards credit card, you’ll often benefit from perks such as travel insurance and extra rewards points. Cryptocurrency purchases do not have the same customer protections you may take for granted with non-crypto payments.
There’s a good chance Mastercard will factor some of these issues into its new crypto offerings. For example, its crypto credit cards may offer travel insurance. And Mastercard may help customers to track their crypto spending for tax purposes. However, it is early days and for now, crypto spenders still need to be alert to potential pitfalls.
This news is republished from another source. You can check the original article here
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