Mastercard Files Patent to Incorporate Blockchain in Fractional Reserve Banking

On October 25, the U.S. Patent and Trademark Office (USPTO) published the full text and image database of the new patent application (No. 20180308092) by American multinational financial services corporation, Mastercard.

According to the patent application, Mastercard is looking to incorporate principles of fractional reserve banking to cryptocurrency. Therefore, it will introduce to its customers a new method of simultaneous storage of crypto and fiat to form ‘blockchain currencies.’ Essentially, it intends to develop a web wallet with a combination of cryptocurrency and fiat accounts, in other terms, a Fractional Reserve Cryptocurrency Bank.

Mastercard believes that the fiat banking system is specially designed and configured to store and protect consumer and merchant information and credentials safely. The patent essentially describes a cryptocurrency credit card network.

“Thus, there is a need to improve on the storage and processing of transactions that utilize blockchain currencies. Existing payment networks and payment processing systems that utilize fiat currency are specially designed and configured to safely store and protect consumer and merchant information and credentials and to transmit sensitive data between computing systems. In addition, existing payment systems are often configured to perform complex calculations, risk assessments, and fraud algorithm applications extremely fast, as to ensure quick processing of fiat currency transactions. Accordingly, the use of traditional payment networks and payment systems technologies in combination with blockchain currencies may provide consumers and merchants the benefits of the decentralized blockchain while still maintaining the security of account information and provide a strong defense against fraud and theft.”

This is not the first time that Mastercard has initiated to integrate its financial solutions with blockchain technology. Earlier in June, Mastercard had filed another patent application with the objective to use public blockchains to verify payment cards at the point of sale.

The patent application had detailed a new convenient process to verify users’ payment credentials, “The transaction may be conducted via the display of a machine-readable code to the point of sale device, which may further prevent skimming as the reading of such a code can be more easily controlled via control of the underlying display; the display can be easily shielded and is often obscured when in a pocket or purse.”

Patent applications usually require a lot of time to be processed. It will be interesting to keep an eye on the developments of Mastercard’s application.

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