Yesterday Mastercard announced plans to launch a beta version of the Mastercard Multi-Token Network (MTN), a blockchain network that will initially support bank deposit tokens in the UK. The card company has already tested deposit token settlement using its existing network infrastructure.
It believes it has the necessary expertise after participating in central bank digital currency (CBDC) projects such as in Australia, and launching a blockchain digital identity solution, the Mastercard Crypto Credential.
Mastercard’s interest in deposit tokens
Mastercard is a participant in one of the major initiatives that plans to enable settlement for deposit tokens, the Regulated Liability Network. In a blog post, Mastercard’s Raj Dhamodharan said the MTN is complementary.
The current thinking around deposit token functionality differs from stablecoins, and explains Mastercard’s interest. At the moment, anyone can transfer a stablecoin without providing identity information. That doesn’t work for regulated banks.
Using the UK as a theoretical example, if I am an HSBC customer and send you an HSBC deposit token, the challenge is you might be a Natwest client. You don’t want to have to onboard with HSBC, so you want Natwest tokens.
One solution is to switch the HSBC tokens for Natwest tokens on receipt. That requires HSBC to pay Natwest behind the scenes, and in the future that will probably happen with a central bank digital currency. It is this settlement aspect that is in Mastercard’s sweetspot.
Multiple blockchains supported
The announcement referred to the Australian CBDC experiments, which enabled tokens to be used for payments to allow-listed entities on a public blockchain. “MTN aims to offer these capabilities across all supported payment tokens and networks in a scalable manner,” says the blog post.
Meanwhile the number of deposit token initiatives is growing. JP Morgan was involved in trials in Singapore as part of Project Guardian as are several more banks in the second iteration. Several German banks are also testing a solutions. The U.S. has proven trickier for the likes of the USDF Consoritum.