We all know how much banks hate bitcoin and cryptocurrencies and we early this month wrote an article about Why Bitcoin is a Real Threat to the Traditional Financial System
But as an old proverb says “if you can’t beat them, join them” If your enemy is stronger then you, it is better for you to join their side.
This is what Mastercard is trying to do with the last patent they filed about Fractional Reserve Cryptocurrency Bank.
Cryptocurrencies & Mastercard: Not a Friendly Relationship
Like most financial institutions and companies, Mastercard never predicted the blockchain implementation, and by the time they noticed it, they were not prepared for the changes it could bring. So their reactions have been negative toward blockchain and cryptocurrencies. But at the same time, they have been exploring the blockchain technology to find ways for implementing it in their system, as well as seeking out ways to be able to make use of cryptocurrencies legally.
Fractional Reserve Blockchain
After years of fighting bitcoin and associating cryptocurrencies with illegal things like money laundering, drugs, etc, Mastercard is claiming a patent for fractional reserve management of blockchain assets.
It is such an irony that fractional reserve banking is one of the things bitcoin was created to solve and now this company wants to create a fractional reserve for bitcoin.
Bitcoiners, in general, are not fans of debt-based currencies. And this step for not owning your private keys and being not sure if the financial institution is holding your funds is not in the same line with the Bitcoin philosophy.
Another negative impact FR might have on cryptocurrencies is because it is a derivative product which the company — in this case, Mastercard — have control over the supply and might inflate the bitcoin supply artificially causing price suppression like we have seen the Gold market for years. This is the reason why many Bitcoiners are against ETFs unlike they are like BAKKT that promises to offer Physically Settled Bitcoin Futures. Eventually, if BAKKT is approved the launch date will be 12th of December.