Mastercard (MA) to Buy CipherTrace, to Expand in CryptoCurrency


Continuing to lend full support to cryptocurrencies, Mastercard Inc. (MA Quick QuoteMA ) has announced that it will acquire CipherTrace, a block chain analytics startup. It provides tools and solutions aimed at preventing illicit cryptocurrency transactions.

Cryptocurrencies have both enthusiasts to root for its cause and detractors to write off the same. The currency is gaining adoption gradually with many corporations like Microsoft, Whole Foods, Home Depot, et al accepting it as a payment mode. El Salvador is the first country to have recently acknowledged Bitcoin as its legal tender. However, cryptocurrencies are slammed as well. For instance, China banned financial institutions and payment companies in the region from providing crypto-related services.

Views are widely divergent about cryptos with some regarding it as the currency of the future while others labelling it as junk. Extreme price volatility, limited acceptance, no-government backing and lack of knowledge are some of the prime reasons for shying away from the digital currencies. Security of transactions made in cryptos is a perennial issue that keeps preventing wholehearted participation. Blockchain was also once considered unhackable, is also being frequently hacked.

Thus until the security loopholes are addressed and participants  feel more confident about the system, the currency will not take off easily. Governments are framing laws to regulate the cryptocurrencies and payment companies are doing their bit in adding security features to crypto transactions.

Cryptocurrencies will bring a paradigm shift in the ways the financial transaction industry operates now. The speed, agility and the security that the blockchain system infuses will lead to transition in payments. Therefore, to remain in the race and to continue to grow with it, all the major companies, namely Mastercard, Visa Inc. (V Quick QuoteV ) , PayPal Holdings, Inc. (PYPL Quick QuotePYPL ) Square, Inc. (SQ Quick QuoteSQ ) and Western Union are embracing cryptocurrencies.

These companies boast a big brand name and are widely trusted by their customers. Thus the endorsement of cryptocurrencies by these entities will have a positive bearing on people. If the same ensures tight security, then the adoption will be faster, easier and on a much broader scale.

With the acquisition of CipherTrace, Mastercard will act as a critical enabler of the adoption of crypto related transactions. Mastercard strongly advocates the use of digital currencies. To this end, it partnered with Uphold, Gemini and BitPay to create crypto cards, new platforms to test and back the Central Bank digital currencies, programs to facilitate the expansive use of blockchain technology and NFTs, and the potential to circulate select stable coins directly on its network.

Visa, the predecessor of Mastercard in terms of market share, informed that more than $1 billion worth of cryptocurrency was spent by consumers using its crypto-linked payment cards this year.

Mastercard is investing where the future lies. Last week, it notified that it will buy the open banking technology provider Aiia to deepen its toes in the open banking space, a revolution in traditional banking.

To be able to cope with the new technological changes in the industry is imperative to stay relevant. Mastercard is hitting the right notes, which should drive its long-term growth. Shares have dipped 1.9% year to date compared with the industry’s decline of 11.4%.


Zacks Investment Research
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Mastercard currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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