During early afternoon trading on Monday, shares of Bakkt Holdings, the digital asset platform that went public through a SPAC (or special purpose acquisition company) last week, were up more than 100%. Trading was paused due to unusually high volume.
It all started with a news release from the two companies, in which they stated that any of Mastercard’s vast ecosystem of banks and merchants in the United States will be able to issue branded cryptocurrency debit and credit cards and allow customers to purchase, sell and hold digital assets through cutodial wallets supported by Bakkt.
Customers of Mastercard will also be able to give consumers the option of earning and spending rewards points in cryptocurrency instead of traditional loyalty points, as well as the opportunity to convert their cryptocurrency into cash to pay for transactions.
As stated in a press release, the relationship “expands Mastercard’s network of cryptocurrency partners, which enables the delivery of cryptocurrency capabilities via Crypto-as-a-Service,” which allows for “rapid access to cryptocurrency capabilities.”
The agreement was initially reported on by CNBC. Customers may manage and spend bitcoins, loyalty points from hotels and airlines, and gift cards via Bakkt, which was founded by NYSE parent company Intercontinental Exchange (ICE).
In addition, the company enables payments for businesses that want to allow their consumers to pay using cryptocurrency. In recent months, there has been a significant increase in interest in cryptocurrencies, with the long-standing cryptocurrency Bitcoin reaching all-time highs earlier this month.
Nearly half of the 2,000 people who took part in the Bakkt United States Consumer Crypto Poll said they had purchased some type of cryptocurrency in the first half of 2021, according to the survey results.
Meanwhile, businesses are increasingly providing customers with the opportunity to purchase goods and services using cryptocurrency.
This is a unique opportunity for brands and merchants looking to appeal to younger consumers and their transaction preferences, as Nancy Gordon, executive vice president of loyalty rewards and payments at Bakkt, stated in a news release. “As brands and merchants look to appeal to younger consumers and their transaction preferences, these new offerings represent a unique opportunity for satisfying increasing demand for crypto, payment, and rewards flexibility,” Gordon said in the news release.
Mastercard itself has been becoming more and more engaged with cryptocurrency, most notably agreeing to purchase CipherTrace, a company that searches blockchains for evidence of unlawful transactions. However, the usage of cryptocurrency (in particular, Bitcoin) as a means of purchasing products and services is still in the early stages of development.
BTIG’s Mark Palmer, a fintech and cryptocurrency analyst, told Fortune magazine in July that “we have Bitcoin holders who believe it makes zero sense to use it for purchases, simply because many of those who are holding it at these levels believe it’s going to be trading at $100,000 to $200,000-plus in 2021, and the last thing you want to do is look back at that time in 2021 when you used your Bitcoin to buy a cup of coffee.”
“One of the main problems that has to be answered is whether or not cryptocurrency holders are even interested in engaging in commerce,” Palmer said. With collaborations like Bakkt’s and Mastercard’s, we may expect to see more solutions to that issue in the near future.