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Mastercard Partners With Ripple for CBDCs — Payment Giant Defying SEC?

Published August 22, 2023 1:48 PM
Omar Elorfaly
Published August 22, 2023 1:48 PM

Key Takeaways

  • Mastercard partners with Ripple despite SEC troubles
  • Ripple establishes its ledger as a basis for countries aiming to launch CBDC
  • US government officials disagree on the viability of CBDC

Mastercard announced  the launch of its new CBDC Partner Program, which it aims to use as a platform to cooperate with key crypto industry members. 

The announcement states facts about the Central Bank Digital Currency industry, including that “93% of central banks are engaged in some form of work on CBDCs, and four retail CBDCs are already in full live circulation.”

Payment company also plans to partner with crypto companies, which may provide the necessary platforms to launch successful CBDCs.

Among the partners the company talked about are “CBDC platform Ripple, blockchain and Web3 software company Consensys, multi-CBDC and tokenized assets solution provider Fluency, digital identity technology provider Idemia, digital identity consultant Consult Hyperion, security technology group Giesecke+Devrient and digital asset operations platform Fireblocks.”

Government Clashes Over CBDC, Ripple

Ripple has been under government scrutiny for over two years as it has had a litigation with the US Securities and Exchange Commission (SEC), the regulating body overseeing digital asset trading.

Ripple recently gained a partial win against the SEC in a lawsuit filed by the regulating body where it claims the company traded in unregistered securities.

The US assets authority, however, refuses to concede to the ruling made by US District Judge Analisa Torres, which states that Ripple’s native coin XRP is not a security.

The commission has since filed an appeal in the case, hoping to reverse Judge Torres’ decision.

The SEC, currently chaired by Gary Gensler, is known to be biased towards crypto, shielding them from that ‘securities’ status. As a result, it does not see CBDC as a viable payment option in the US.

While several governmental entities, including members of Congress, have had their opinions heard regarding their disagreement with the SEC’s stance on digital assets, also asking for the removal of Gary Gensler from leadership position, the SEC seems adamant about fighting off the implementation of CBDC in the US.

Mastercard and Ripple did not immediately respond to a request for comment

In contrast, countries such as New Zealand are working on pushing forward the digitization of their payment platforms. News leaked  recently that the New Zealand government is in talks with Ripple to cooperate on the of country’s CBDC. 

Mastercard Vs. The SEC?

Mastercard knows SEC’s stance on both CBDCs and Ripple. By joining hands with Ripple, the payment company makes it clear that it refuses to bow down to the regulating body’s tight control of the market.

Surely, the SEC and Gensler are bound to have Mastercard in their sights, as the act of defiance may trigger an avalanche of similar actions by adjacent financial institutions. 

The SEC already has its hands full with crypto companies capitalizing on Ripple’s triumph, which resulted in companies’ increased optimism in their own SEC lawsuits.

Terraform Labs recently attempted to dismiss its SEC lawsuit in which the regulator claimed the company’s native coins were indeed traded as unregistered securities, citing Judge Torres’ ruling in the Ripple case as a basis for arguing the dismissal.

However, US District Judge Jed Rakoff ruled in favor of the regulating body which sparked fears that it might in turn affect Ripple’s legal advantage.

In conclusion, Mastercard may have to deal with SEC blowback from partnering with Ripple to work on launching a project the SEC is adamantly opposed to. But the company undoubtedly holds influence over the market considering its status as one of the world’s leading payment platforms.

Besides, if XRP is the basis of the SEC’s argument against Ripple, then the regulating body would have no legal ground to stand on should it decide to go on the offensive against Mastercard.

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