Mastercard buys BVNK, England not budging on stablecoin reserves

Mastercard (NASDAQ: MA) has placed a nearly $2 billion bet on its stablecoin payments future, while the Bank of England (BoE) says stablecoin issuers unhappy with its fiat reserve requirements should consider themselves fortunate it’s not worse.

On Tuesday, Mastercard announced that it had reached “a definitive agreement” to acquire stablecoin infrastructure firm BVNK in a deal worth “up to $1.8 billion, including $300 million in contingent payments.” Mastercard says the deal, which is expected to close later this year, “further expands Mastercard’s end-to-end support of digital assets and value movement across currencies, rails and regions.”

Mastercard said the key to supporting stablecoin use cases (cross-border remittances, payouts, P2P and B2B payments, etc.) is connecting stablecoin rails to existing fiat rails. The union of the two firms “will deliver trusted interoperability at scale that can seamlessly connect across systems.”

Mastercard’s chief product officer, Jorn Lambert, said: “Most financial institutions and fintechs will in time provide digital currency services, be it with stablecoins or tokenized deposits … adding on-chain rails to our network will support speed and programmability for virtually every type of transaction.”

BVNK handled $30 billion in stablecoin payments last year, but co-founder/CEO Jesse Hemson-Struthers claimed “we have only scratched the surface of what’s possible. This deal brings together complementary capabilities to define and deliver the future of money.”

BVNK and Mastercard were discussing some kind of tie-up last year, but these talks were thought to have been mothballed. BVNK’s other suitors included the Coinbase (NASDAQ: COIN) exchange, which reportedly offered $2 billion to acquire the firm last year after Coinbase Ventures took a stake in BVNK in December 2024. Meanwhile, Mastercard rival Visa (NASDAQ: V), which has its own stablecoin ambitions, is both a BVNK partner and investor.

Last week, Mastercard announced its new Crypto Partner Program, a “global initiative that brings together more than 85 crypto‑native companies, payments providers, and financial institutions to create a forum for meaningful dialogue and collaboration as this space continues to mature.”

Mastercard said program participants “will engage with Mastercard teams on the design and direction of future products and services … The focus is practical execution: translating technical innovation into scalable, compliant use cases that can operate across markets and integrate seamlessly into everyday commerce.”

It would be quicker to list who’s not on this partner list, but suffice it to say it includes major exchanges, stablecoin issuers, and their bespoke payment networks, digital asset custodians, and more. However, a name conspicuously absent from the list is Tether, issuer of the market-leading USDT stablecoin. 

Wells Fargo, PayPal

Plenty of other mainstream financial giants are making their own forays into the stablecoin sphere, including Wells Fargo (NASDAQ: WFC), which earlier this month filed a trademark application for ‘WFUSD.’

Wells Fargo has yet to publicly comment on its plans for its new trademark, but the application covers a host of potential use cases, including “software in the nature of a mobile application for facilitating financial transactions,” “cryptocurrency payment processing,” “blockchain-based smart contracts,” tokenization, and a whole lot more. 

Nearly a year ago, Wells Fargo was reported to be one of several Wall Street banks in discussions about launching a jointly operated stablecoin, although many of those banks are also pursuing individual stablecoin projects.

Not to be outdone, payment processing giant PayPal (NASDAQ: PYPL) chose St. Patrick’s Day to announce that it was expanding access to its PYUSD stablecoin via PayPal accounts to “70 markets worldwide.” That’s roughly one-third of the markets PayPal currently serves.

Customers in these markets can now buy, hold, send, and receive PYUSD directly from their PayPal accounts, a perk previously available only to customers in the U.S. and U.K. Users can also convert their PYUSD to local currency when withdrawing, and eligible users (but not those in the U.K. or Singapore) can also earn rewards for holding PYUSD.

PayPal’s GM of crypto, May Zabaneh, said: “Consumers and businesses around the world are looking for faster, more seamless ways to transact globally, and the current system still charges too much, takes too long, and settles on timelines that were designed for a different era.”

PayPal launched PYUSD in August 2023 via a partnership with Paxos, but it took two years for the token’s market cap to surpass $1 billion. However, the cap took off like a rocket last September and currently sits at $4.1 billion, seventh-highest among U.S. dollar stablecoins.

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Stablecoin geographic, functional splits growing

Earlier this year, a YouGov survey found that it was easier to acquire stablecoins than to actually use them as a method of payment. Other reports have found that stablecoins’ primary use case stubbornly remains as one-half of a trading pair and that their appeal remains limited in developed markets where payment options abound.

Conversely, emerging markets, particularly those with unstable local currencies, have gravitated towards stablecoins as a means of avoiding devaluation and accessing a cost-effective channel for remittances.

The most recent Stablecoin Retail Payments Index Report from payment platform Orbital (using data sourced from Artemis) notes how residents of ‘distressed’ economies are willing to pay high premiums to acquire stablecoins to avoid depreciation and sidestep capital controls.

The extreme examples of these ‘distressed’ economies are Algeria, where users pay a 97% premium to the stated value of a stablecoin, followed by Bolivia (71%) and Venezuela (41%). So-called ‘high-demand’ markets like Turkey, Tajikistan, and Mozambique pay smaller but still significant premiums (15-20%) to the listed stablecoin price.

The report also shows a split in terms of stablecoin preference, with Tether’s USDT the clear favorite in emerging markets and Circle’s (NASDAQ: CRCL) USDC the go-to choice in developed markets.

USDT claimed the bulk of transfers under $10,000 last year, but USDC’s growth in its number of transactions was nearly twice its volume growth, which Orbital says is “consistent with programmatic usage, such as automated treasury management and payroll integrations, rather than low-frequency, high-value transfers.”

USDC’s reputation as the ‘institutional rail’ is in keeping with its status as the preferred token of decentralized finance (DeFi) platforms. USDC also has a more solid footing in the (soon to be) regulated U.S. market than Tether, which opted to launch a new U.S.-focused stablecoin (USAT) to keep USDT’s focus on emerging markets (and avoid additional scrutiny of USDT’s unaudited fiat reserves).

And yet, new data from Mizuho analysts suggested that USDC’s adjusted transaction volume exceeded USDT’s since the year began, marking the first time that’s occurred since 2019. In a note issued last Friday, Mizuho said USDC accounted for $2.2 trillion in year-to-date adjusted volume versus just $1.3 trillion for USDT, giving USDC a 64% share.

Mizuho’s formula for ‘adjusted volume’ is complex, encompassing both centralized and decentralized exchanges (DEX), as well as addresses that “have not transacted >1K transactions or 10M volume in any 30-day period.” Translated into English, that’s supposed to represent “a real person or institution actually moving money.”

USDC’s DeFi dominance is on full display in its market cap surge on the Hyperliquid DEX, which has spiked over 155% (to $580 million) in the past 30 days. Since the year began, USDC’s overall market cap has risen by $4.4 billion to $79.6 billion (after slipping below $70b at the end of January). Over the same span, USDT’s cap has fallen by $2.7 billion to $184.1 billion.

Circle’s share price closed Tuesday up 5.2% to $132.31, pushing its year-to-date gain to nearly 67%. That’s still below where it was trading before last October’s abrupt plunge in the value of prominent tokens like BTC, but a far more preferable situation to the $50 price the shares were worth in early February.

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Bank of England

Mastercard’s head of global policy, Jesse McWaters, is scheduled to testify at the final House of Lords hearing on the Growth and Proposed Regulation of Stablecoins in the U.K. on Wednesday, March 18, along with Dante Disparte, Circle’s chief strategy officer.

The March 11 hearing featured testimony from Sarah Breeden, deputy governor, and Sasha Mills, executive director of financial market infrastructure, at the Bank of England (BoE). Among the tidbits that emerged from that session is that the BoE could be flexible regarding the government’s proposed stablecoin ownership caps (£20,000 [$26,722] for individuals, £10 million [$13 million] for businesses).

Breeden said the caps were intended as a precautionary (and temporary) move “as the financial system adjusts to a world that might have stablecoins playing a big role.” Echoing the U.S. banking sector’s concerns about deposit flight from savings accounts to stablecoins, Breeden said “If that funding is not replaced in banks we are in danger of seeing a precipitous drop in credit for businesses and households.”

But Breeden said she expects that “as funds flow from banks to payments but there is still a demand to borrow, other forms of funding for banks would step in.” Breeden cited the U.S. example, “where much of corporate credit, much of household credit, does actually come from financial markets rather than banks … The limits are there to support an orderly transition as the shape of the system changes.”

Breeden said the BoE is “genuinely open to other ways of achieving” its goal of managing “this risk to the provision of credit … but I think that you would expect us, as the financial stability authority, to ensure that there is not a precipitous drop of credit to the businesses and households in the UK.”

Breeden said the figures the BoE proposed for the caps struck “a balance between usability and managing this risk of a disorderly transition to a system with stablecoins being widely used as payments.” (Breeden also suggested that U.K. retail giants like Tesco (LSE: TSCO.L) “can apply to us for a bigger limit.”)

As for the proposed requirement for issuers of ‘systemic’ (large) stablecoins to hold 40% of their fiat reserves in cash in ‘unremunerated’ BoE accounts, Breeden noted that the original proposal was 100% unremunerated, and the climbdown from that original figure “shows you that we do listen.”

But Breeden appeared to resist any further reductions, arguing that “these coins might be called stablecoins but the ones we are talking about are being used as money. We need to ensure that they are able to function as money, which means that if liquidity runs crystallize they are able to be met.” The 40% figure “has been sized with regard to actual experience of liquidity and same-day liquidity risks that the coins may face.”

Noting that the European Union’s stablecoin regime requires 60% of reserves to be held in cash, Breeden told the Lords that it’s natural for there to be “a tension between what you hear from us and what you hear from the industry, because every change that is made is a change that matters for their bottom line.”

Breeden suggested that the crypto sector should acknowledge (and be grateful) that the BoE is “the only central bank in the world that has proposed to be the banker to these coins … You can hold your funds with us … We will give you a lender of last resort facility so that if you can’t monetize your securities in the market, just like banks can monetize assets with us, so can you. That is us going way beyond any other central bank to support this innovation.”

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Watch: CBDCs or Stablecoins? What the Industry Leaders Actually Think