MasterCard is Upside-Down Down Under
What if removing identity within every transaction is what guarantees consumer protection?
On November 27, 2014, global payment processor MasterCard sent a letter to the Senate Economics Committee in Australia as part of that government’s “Inquiry into Digital Currency”.
MasterCard boasts of operating the world’s fastest payment processing network in more than 210 countries and territories. Yet, this $102 billion corporation is actively soliciting the Australian government to “level the playing field” between it and the open-source project known as Bitcoin.
The main thrust of MasterCard’s argument is that all payment systems should be shoe-horned into the same regulatory framework to ensure “consumer protection.” Considering the checkered past of MasterCard on the issue of consumer protection, this stance is baffling.
Last year, MasterCard was party to the largest antitrust settlement in history. The $5.7 billion payoff for price fixing and harming consumers was criticized by Wal-Mart as being too lenient. Let that sink in…even Wal-Mart thinks MasterCard’s anti-competitive practices go too far.
In the MasterCard worldview, tying identity to every transaction is what guarantees consumer protection. If you know the who, what, when, and where of a transaction then you can assess its validity, minimize risk, and offer the ultimate protection to the consumer. Voila!
Still, we are talking about a mechanical process. A financial transaction is nothing more than a human invention. And, what man-made creation in all history of recorded times has been deemed so perfect that it has made the search for improvement a fruitless exercise?
So, let’s consider the opposite of the MasterCard worldview. What if removing identity within every transaction is what guarantees consumer protection? What if, when hackers stole 40 million debit/credit card numbers and 70 million personal records from Target last year, that information could have instantly been rendered worthless because it was not tied to identity? What if the same could be said when hackers made off with 56 million card numbers in the Home Depot breach just months ago?
This is a huge benefit of using Bitcoin. As a merchant, I can verify receipt of a secure payment. As a consumer, I can have the comfort of knowing that once my payment is made then my relationship with that merchant is over. I have left nothing behind for anyone to steal. No more Target and Home Depot style breaches, ever.
I am not suggesting that one of the above methods is better than the other. The most important thing as a consumer is to have choice. This is not something that should be mandated by a private corporation and enforced by a government. If I want to have a relationship with a merchant and I wish to trust them with my vital information, then that should be my choice.
Or should it? According to MasterCard, the answer is no.
One of the sub-sections of their submission is entitled, “Anti-Money Laundering and Counter-Terrorist Financing / Anonymity / Facilitating Trade in Illegal Goods and Services”. This title gets to the critical core of what the legacy financial regime sees in blockchain technology. It tars individuals seeking anonymity with the same brush as terrorists and drug cartels. By that thinking, if I value personal privacy then I must be a criminal.
The MasterCard proposal goes on to suggest, “…all transactions go through regulated and transparent administrators subject to supervision by Australia authorities.”
Considering the black market in Australia is seven times the entire size of Bitcoin’s value and rising at an alarming rate, it would seem switching to a public ledger system like the blockchain would actually be an improvement over the status quo for Australian authorities.
The obvious problem with this transparent approach is that MasterCard would be locked out of its duopolistic control of all that consumer data. And, if the traffic on its payment network moves over to a public interchange then its very existence is threatened. The company just increased its dividend by 45% and expanded a stock buyback program to nearly $4 billion. From their point of view, why mess with a good thing?
The great irony is that the main differentiator between the competing Visa network and MasterCard is, unlike Visa, MasterCard is a peer-to-peer network. Yes, the fundamental structure of the Bitcoin network and the MasterCard network are identical! In its own press materials, MasterCard espouses the virtues of peer-to-peer technology: reliability, speed, and security.
So if the technology at the base of Bitcoin and MasterCard are essentially the same, then what exactly is MasterCard proposing to the Australian government?
Control. Not by the Aussies, but by MasterCard.
Priceless.
This article was originally written for the December 2014 edition of Crypto Biz Magazine.
About the author
Valerian Bennett is founder of TheProtocol.TV, a premium video network dedicated to covering the global decentralization movement. Mr. Bennett is a veteran television producer/director/editor and an award-winning documentary filmmaker living in Los Angeles. His new short documentary film, “Bitcoin: Buenos Aires” is available online.
Originally published at www.theprotocol.tv on December 5, 2014.
