Raj Dhamodharan started working at Mastercard in 2010 when bitcoin and crypto were seen as fringe technologies.
Fast forward a decade: Dhamodharan is now Mastercard’s point man for crypto, in charge of the payments giant’s game plan for a fast-moving trend upending financial services.
It’s a challenging role given the view that crypto poses a serious threat to Mastercard and archrival Visa. Investor Chamath Palihapitiya predicted in December that the two companies would be the “biggest business loser for 2022,” calling them a "completely contrived duopoly that doesn't need to exist."
The prediction is based on the “theoretical ability” of blockchain technology to “replace centralized intermediaries,” Alex Johnson, author of the Fintech Takes newsletter, told Protocol. “But Visa and Mastercard didn’t get to where they are today by taking competitive threats to their hegemony — no matter how theoretical — lightly.”
Mastercard has embraced an aggressive strategy to take on crypto. It acquired the blockchain intelligence company CipherTrace late last year. Last week, it announced that a crypto rewards credit card it developed with Gemini is now available in all 50 states. Mastercard also unveiled a partnership with Nexo on a payment card based on a crypto-backed credit line.
Dhamodharan, who is Mastercard’s global head of crypto and blockchain, is quick to dismiss warnings about crypto as a threat.
“We don't think about it that way at all,” he told Protocol. Instead, Mastercard sees opportunities to make crypto accessible to the payment network’s massive user base. Mastercard said its financial-institution customers had issued about 3 billion cards worldwide as of December 2021.
“What we're always looking for, for our customer base and partners, is providing choice in a safe and simple manner,” he added.
Dhamodharan dug deep into Mastercard’s crypto strategy in an interview with Protocol. He also talked about how the company is adapting to new trends in crypto led by the rise of NFTs and to the growing push for crypto regulation.
This interview has been edited for clarity and brevity.
What’s your current role in Mastercard’s crypto strategy?
I'm originally an engineer, a recovering one if you will. My Mastercard career started in Asia in mobile and ecommerce products and working with regions all the way from Australia to India. I learned quite a bit about how to get digital products out to the market in a scalable way.
In the last couple of years, I’ve led this group that focuses on crypto, talking about how our current network can actually facilitate crypto for millions and billions of consumers to experience safely.
It's a very interesting role. I'm privileged to be in this space at this time because we are going through many cycles of evolution of various technologies.
Crypto is actually a package of multiple technologies. Crypto as an investment asset is probably the most mature one. Our job is really looking at a range of technologies and value propositions available in crypto, to make sure that can be experienced in a safe and secure way. Our ecosystem has billions of consumers, millions of merchants and businesses. How can they experience crypto safely?
Bitcoin is not just about the currency. It’s also about the chain. It's also about the cryptology behind it and the decentralization and all that.
How did you react to bitcoin and crypto when it was just getting started and people were dismissing it as a passing fad?
I don’t think anyone could have predicted how bitcoin rose over the years as an asset, as a store of value and so forth. No one could have predicted that. But it is very clear that a few technologies got packaged in quite an innovative way even at that time.
This is about cryptocurrency and digital currency and mechanisms to prevent double spend. It's also a blockchain technology that allows people to have a distributed consensus mechanism.
All of this was invented pretty much at the same time. The evolution of that [led to] multiple currencies, multiple consensus mechanisms, different chains. Now, we live in a multicurrency, multichain world.
There are those who believe that the blockchains pose a threat to what's been described as a duopoly, the dominance of Visa and Mastercard in payments.
We don't think about it that way at all. I go back to the maturity cycles of various technologies in crypto. Potentially, the most mature one is crypto as an investment asset class. NFTs is the next one. And there are a few other technologies like on the identity side and the DeFi side coming up in different levels of maturity and cycles.
What we're always looking for, for our customer base and partners, is providing choice in a safe and simple manner. Safety and simplicity is everything. We have run multiple networks today. Moving value and providing consumers and merchants different ways of moving value is not new to us. We are always looking for that.
When it became clear that we can provide a safe way to open up our network to provide a mechanism for people to buy cards using cards they have today for bitcoin or ether because they want to buy that as an investment, we opened it up.
That is one of the growing flows on our network at the moment, buying crypto using our cards via crypto-to-fiat conversion. Now once they bought it, they wanted a way to access those holdings in a safe and secure manner.
Not everyone wants to spend their crypto. We said: “Okay, what are the various ways that we can provide access?” There are four different types of crypto cards that we have in the market today.
The first one is a card that connects directly to your crypto holdings. We don't move the crypto. It's the issuer of the card that provides the fiat necessary and settles with us.
The type-two card is that a consumer is asked explicitly to sell their assets and get to fiat. Then you have U.S. dollar holdings that you spend just like you would spend a prepaid card or something like that.
The third type is the Gemini card which is, “I have crypto, but I want to use it as investment holdings and I'm not necessarily interested in spending it. I'm interested in earning more crypto.” Gemini said they have 500,000 people waiting to get that card. They're working through that pipeline. I myself am on the waiting list. I don't want to jump the line. I’ll wait with other consumers. It's a popular card because people earn crypto and then it sits in your Gemini wallet whether you want bitcoin or ether.
So it's a regular credit card that uses fiat, but the rewards are in bitcoin?
Bitcoin or any crypto that they support. The beauty of that is that you're interested in crypto investments, but you're not interested in spending [crypto], you're interested in earning. Think of it as the new points card or new cash-back card. Instead of the cash back, you get crypto back.
The Nexo thing is quite unique. You have, let's say, a couple of bitcoins that you bought a while ago and you want to borrow against it … This allows you to go to a company like Nexo and say you have bitcoin holdings and I'm going to borrow against it.
The idea behind this is: No matter where you fall, you have a lot of crypto you want to spend, or you have a lot of crypto that you want to borrow against, we provide those opportunities.
There are many from crypto and DeFi that are distrustful of centralized, traditional financial institutions like Mastercard. What were some of the hurdles that you had to overcome in this connection?
I wouldn’t say hurdle but more: How do you curate the space in a way that you can bring a simple consumer experience to the consumers?
I'm gonna give a real tangible example. The next thing to come out after these asset classes in the space is NFT. NFT is a great invention and it is being applied to art at the moment. For creators, it opens up opportunities for them to sell their creations in unprecedented ways. But until recently, if you are not crypto native [and you want] to buy an NFT, you need to go buy crypto, and you have to host that in a self-custodied wallet, go connect to a website and spend that crypto. The experience is very clunky.
Contrast that with what we opened up with Coinbase and many other NFT marketplaces. You go there, you browse various offerings from different creators, you click, you enter your card. At the end of it, in your wallet is your NFT.
There are millions of new creators with a lot of innovations. On the buying side, they’re limited to a few people on the crypto-native side who could navigate that clunky experience. Now we've opened up to 3.4 billion cards.
What has been the most difficult conversation as you were trying to figure out “How do we get into it?”
We never think about it as, “Oh, how do we get into it?” It is more about, “Which one of these technologies is ready for mass use for a massive consumer base that we have? Which one can be brought to the network so that everyone can experience it?”
It's not challenges. It is a journey. How do we bring more safety, more security to this? How do we provide more clarity to what's happening in the public blockchain so that we can find which one of those spaces we can interact with?
Safety and security is top of mind. It is, I think, an ongoing challenge collectively for the industry.
The second thing I think we are collectively navigating as an industry and as an ecosystem is the regulatory climate in different jurisdictions.
We're not trying to push this in one way or the other. But it is working with the policymakers. How do we encourage clarity in regulation so that more people can get in with confidence? I think the intentions are in the right place and we will iterate through it.
You saw the [Biden] executive order which puts out a framework for different federal agencies to get involved. I'm also encouraged by the European Parliament's effort to make a regulation. All of that helps. When rules are written up in an explicit way it makes it easy for everyone to follow.
But some crypto companies are worried about the EU vote on stricter KYC for crypto. Some of them actually protested, including Gemini. How do you react to that?
There are always people who are going to find a few things that they like and things they may not like from their perspective and I respect that. What I, and we in general as a company, welcome is more clarity. The rules of the road are clear. People can engage with a lot more certainty.
But there are those in the crypto industry who say there is no clarity, that it is confusing.
I think these two examples that I gave are where people are trying to provide clarity. I think we could use more clarity in various jurisdictions. We only talked about two jurisdictions and there are a lot more.
We will obviously engage and provide our perspectives. We are in many of the working groups or consultation groups with many of these government bodies where we provide our opinion about how we can actually provide safe and secure access to millions of people.
The SEC has raised questions on crypto as a lending product and recently penalized BlockFi for its lending product. How do you view these questions related to how crypto is being used for lending?
Our general view is that every market needs to follow the law of the land which is very important. Compliance is very, very important for us.
You recently filed for trademarks in the metaverse. How does the metaverse fit into your crypto game plan?
It's another experience that consumers can get into. There are many iterations of the metaverse. I don't think anyone has settled, “Oh, ‘metaverse’ means this.” It means many things to different people. But for us, we would approach this like we approach any other innovation. For example, NFTs are actually available in some metaverses as a shopping mall for you to go experience and purchase. That's one experience that's tangible.
I think this will continue to evolve. You will see us continually experimenting with this to see what is useful for consumers, what's innovative and what is a simple and safe consumer experience.
What are ways in which blockchain and crypto are evolving that worry you?
I am worried about the number of security issues that are happening in the public blockchain world. The level of innovation and the potential for this technology is immense. I think as a community, and I include all of us in this, focusing on that and leaning into that and fixing it and providing a safe experience will actually bring the benefits of it to even more people. That's a collective kind of worry for all of us in the crypto community.
So is that what you’re most worried about?
It is making the space safe.