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Global Management Forum 2019

Mastercard ready to embrace digital currencies -- including China's

US credit card giant eyes Asia's emerging markets but faces hurdles

Mastercard International Markets President Gilberto Caldart says consumers are best served by a "level playing field" that affords them access to the finest technologies. (Photo by Manami Yamada)

TOKYO -- Mastercard is warming to the notion of central bank-backed digital currencies, while keeping its distance from private sector-led cryptocurrency initiatives -- seen by many as a direct challenge to state sovereignty.

"If it is a digital currency established by a government and is accepted by that regulatory environment, we'll be operating with it," Gilberto Caldart, president of Mastercard's international operations, said in an interview with the Nikkei Asian Review.

His comments came as the Europe and China look to digitize their own currencies, partly motivated by Facebook's initiative to bring digital money into the mainstream. The social network's blockchain-based payment system, called Libra, promises to let the more than 2 billion Facebook users conduct transactions across national borders.

Mastercard was one of the original 28 companies that supported the Libra project, but it later backed out. Caldart stressed that there are many issues to iron out in this nascent field.

"There are a lot of countries thinking about digital currencies. You've got to see how that plays out," he said while visiting Tokyo, where he spoke at the Nikkei Global Management Forum in late October. "There are a lot of unanswered questions about what really is digital currency, how it will operate and so on. Our view is, 'Let's see how it goes.'"

China is widely expected to launch a digital version of its national currency soon, making the yuan the first major global currency to make the transition. Beijing's proposed alternative to paper notes and coins is believed to be based in part on blockchain technology, but the details remain sketchy.

Last month, China passed a law, due to take effect on Jan. 1, aimed at facilitating the development of the cryptography business, according to the Chinese press. The European Central Bank is also pressing for the development of a public digital currency in Europe, according to Reuters.

As for Libra -- a type of cryptocurrency called a stable coin, whose value is pegged to particular assets or currencies -- Caldart explained why Mastercard originally intended to get involved. "We are a company that has interest in anything that happens in the payment space," he said. "We thought it would make sense for us to be at the table."

But while he said Mastercard will continue to explore the stable coin concept, the company "decided at the moment it was not a right thing to continue and engage with Libra."

Despite the setback for Libra, digital payment platforms continue to proliferate, posing a challenge for long-established credit card companies like Mastercard. Emerging markets are some of the most intense battlegrounds, home to local smartphone-based services like GrabPay of Singapore, Go-Pay of Indonesia and AliPay of China.

Some governments, such as India, Thailand and Indonesia, are promoting the local systems on the grounds that transaction records should be in the hands of domestic players, not foreign companies. China has kept its credit card market closed to foreign brands.

Caldart argued that consumers would be better off if they have access to the best available technologies.

"We live in a connected world," he said. "Problems of frauds, issues of cybersecurity are not local. They are global."

Mastercard, he said, prefers "a level playing field and an inter-operative market where everybody competes to provide the best to consumers in terms of cost, price, innovation and technology."

Ultimately, however, he said it is up to local governments to open up their markets. "It's not our birthright" to operate in a foreign country, he said. "We operate based on the rules of the game."

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