Thank you.
I'm honoured to have the opportunity to represent Mastercard in today’s important discussion on blockchain technology.
Mastercard’s operations today are about much more than just our card network. Our business is focused on enabling trusted digital commerce across multiple payment rails, including cards, real-time payments and now blockchain-based networks.
When we think about blockchain, we consider it within two distinct dimensions: first, as a novel technology with the potential to transform how information is shared and how value gets moved, and second, as the underlying engine for a rapidly growing community of crypto-asset ecosystems.
As a technology company, Mastercard invests heavily in blockchain research. We have one of the largest blockchain patent portfolios in the payments industry, and we are exploring a range of applications, many of which are unconnected to existing crypto-asset ecosystems. This includes building new, next-generation digital ID systems, streamlining trade finance and enabling proof of provenance within complex supply chains.
At the same time, Mastercard plays an important role as a payments company. For consumers who choose to interact with crypto-assets, we help them safely bridge the gap between the world of crypto and traditional finance. We do this by establishing secure and compliant on- and off-ramps for funds and by enabling the issuance of cards that let individuals seamlessly fund transactions using value stored in their crypto accounts.
Our due diligence processes have long recognized the risks inherent in novel ecosystems. We apply strict criteria to our partnerships with crypto-asset service providers, requiring compliance with all relevant regulations and a commitment to robust standards of consumer protection. We fundamentally believe that a blockchain-powered future isn’t possible without accountable systems that ensure safety, compliance and good governance.
Recent developments in crypto have underlined the importance of these principles, as well as the detrimental effects of unclear regulation and lax enforcement. In contrast to those who suggest that regulation would stymie the rapid pace of crypto’s innovation, we believe that effective regulation will accelerate the most beneficial kinds of innovation while mitigating many of the evident risks.
As this committee considers the regulatory frameworks required for blockchain-based systems, we humbly present the following three suggestions.
First, the regulation of crypto assets should begin with the goal of being technology neutral. This means establishing frameworks that avoid regulatory arbitrage by establishing a consistent burden of compliance across similar types of regulated assets and activities. An excellent example of this is the Financial Action Task Force, a global anti-money laundering standard setter that has provided clear guidance on how existing financial-crime rules should be applied to firms handling crypto-assets.
Second, where new regulation is required to accommodate the distinct characteristics of a blockchain-based ecosystem—for example, to recognize the unique cybersecurity risks and challenges faced by crypto-asset custodians—those new rules should aim to deliver the same regulatory outcomes as comparable assets and activities for a given level of risk.
Finally, a particular focus should be given to stablecoins. Efforts to bring stablecoins into the regulatory perimeter are under way in many advanced economies, including the European Union, the United States and the United Kingdom. Canada may wish to consider the merits of a comprehensive regulatory regime for stablecoins that imposes robust requirements for liquidity and capital management, as well as standards for redeemability, consumer protection, operational resilience and the resolution of stablecoin arrangements in the event of failure.
In closing, we believe blockchain has the potential to drive significant value across a wide range of use cases, but that any system trusted to move value needs clear rules to manage risk and address unforeseen governance challenges. We are eager to collaborate with this committee and with similar efforts across the country to ensure safety, security and compliance across the financial system.
Thank you so much for your time. I look forward to answering your questions.