Money movement is moving into the future at a rapid clip.
But are central banks, enterprise organizations, consumers, and merchants ready for a new era of digitized programmability and payment vehicle innovation?
“The true intrinsic value of blockchain, which is around programmability of transactions, immutability of transactions, and the ability to do delivery versus payment and always-on types of payments, has yet to be unlocked,” Jorn Lambert, Chief Digital Officer at Mastercard, tells PYMNTS.
“Until there exists the ability to actually develop financially-regulated applications on the blockchain, the benefits will never go mainstream,” Lambert explains. “Regulated financial institutions are crucial for [tokenized blockchain money movement vehicles] to truly scale.”
As the world moves increasingly from an economy based on the transfer of information to one where the transfer of value becomes paramount, the arc of innovation is reshaping the fundamental infrastructures that support how individuals, businesses and organizations connect, interact and transact globally.
While blockchain has become somewhat of a dirty word after the crypto sector’s disastrous 2022, many observers maintain that digital asset and blockchain technologies remain on a trajectory toward becoming critical infrastructure for storing and moving value.
After all, bringing the power of 24/7 operations, programmability and immutability to all aspects of the economy still holds the potential to deliver a true and ongoing transformation in the way money moves.
“The world’s economy today is powered by the balance sheet of the banks, by commercial bank money,” Lambert says.
He explains that for blockchain-based money movement to achieve a meaningful impact, “commercial bank money” needs to be brought onto the blockchain in a trusted, secure and scalable way — what he refers to as “tokenized deposits.”
“When the App Store was launched, nobody planned for Uber as an application or even as the gig economy as an industry to emerge. What is important is to actually create the environment in which that can happen,” Lambert says.
That’s why Mastercard is working to develop what it calls a Multi-Token Network (MTN), a digital asset “app store” ecosystem with the vision of providing a set of foundational capabilities designed to make transactions within the digital asset and blockchain ecosystems secure, scalable and interoperable — ultimately enabling more efficient and innovative payment and commerce applications.
“[Any digital asset solution] has to be interoperable with the real-world and needs to be interoperable among different blockchains … and if something goes wrong, you need rules of the road around how that problems gets resolved,” Lambert explains.
He adds that he believes cross-border payments, trade finance, supply trade finance insurance and capital markets all represent easy-win use case areas where blockchain-based benefits and tokenization value adds like programmability can provide fluidity, transparency and improved transaction experiences.
“In order to scale, you need to bring existing regulated money, central bank-backed money onto the blockchain. That hasn’t been done yet,” Lambert says.
After all, the key to scalable success for any ecosystem is to have a means of value exchange, a currency that consumers can trust and understand, and with which they can transact and do what they really want to do.
That’s why, in his view, what’s been missing this whole time from the blockchain puzzle was bringing the traditional financial industry — as well as the emergent FinTech sector — to the table.
“They are unable to come to the table today because there isn’t the framework for them to operate in a safe environment,” Lambert explains.
“It’ll be very interesting to see what transpires because not only are we looking to engage with financial institutions, FinTech developers and academia, but also we are asking central banks to engage as observers about this so that people see that this is entirely transparent and to develop real-life solutions on this,” Lambert adds.
Still, while he highlights the potential of central bank digital currencies (CBDCs), Lambert acknowledges their limited geographical relevance and a broader lack of consumer understanding. He believes that in order to scale and bring existing regulated money onto the blockchain, new solutions are needed.
“If it doesn’t scale, then it doesn’t matter,” Lambert notes.
One of the most disruptive concepts enabled by blockchain technology is programmable money, which allows for tokenization and programmability around money movement. This means that conditions can be embedded in transactions, enabling if-then logic in payments.
Lambert believes that the ability for tokenized deposits to be programmable offers a clue into what the future of money and payments could look like.
“Taking that kind of if-then logic and embedding it in a payment instruction is something that I think has enormous value to just about any industry,” he says.
While Lambert can imagine blockchain becoming truly like the Internet — not just a way to store and move data, but as a way to store and move value — he acknowledges that there is a “huge trust deficit” in the crypto space.
“This is about people’s money, people’s livelihood. We need to bring trust back into the system, and we need to bring the right frameworks for financial institutions to play ball as well,” he says.
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