Money moves into the future at a rapid clip.
But are central banks, corporate organizations, consumers and merchants ready for a new era of digitized programmability and payment innovation?
“The true intrinsic value of blockchain, which revolves around programmability of transactions, immutability of transactions, and the ability to do delivery versus payment and always-available types of payments, has yet to be unlocked,” Jorn Lambert, Chief Digital Officer at Mastercard, tells WebMD. PYMNTS.
“Until there is an opportunity to actually develop financially regulated applications on the blockchain, the benefits will never become mainstream,” Lambert explained. “Regulated financial institutions are crucial to this [tokenized blockchain money movement vehicles] to really scale.”
As the world increasingly evolves from an economy based on the transfer of information to one where the transfer of value becomes paramount, the arc of innovation is reshaping the foundational infrastructures that support how individuals, businesses and organizations worldwide connect , interact with each other and carry out transactions.
While blockchain has become a bit of a dirty word after the crypto sector’s catastrophic 2022, many observers argue that digital assets and blockchain technologies continue on their way to becoming a critical infrastructure for storing and moving value.
After all, bringing the power of 24/7 operations, programmability and immutability to all aspects of the economy still has the potential to create a real and ongoing transformation in the way money moves.
“Today’s global economy is driven by the balance sheets of the banks, by the money of commercial banks,” says Lambert.
He explains that for blockchain-based money movements to have a meaningful impact, “commercial bank money” must be brought to the blockchain in a trusted, secure, and scalable way — what he calls “tokenized deposits.”
Next generation payment ecosystem
“When the App Store launched, no one planned for Uber as an application or even the gig economy to emerge as an industry. What’s important is to actually create the environment in which that can happen,” says Lambert.
That’s why Mastercard is developing what it calls a Multi-Token Network (MTN), an “app store” digital asset ecosystem with a vision to provide a set of foundational capabilities designed to make transactions across the digital asset and blockchain ecosystems secure, scalable, and interoperable, ultimately enabling more efficient and more innovative payment and commerce applications become possible.
“[Any digital asset solution] needs to be interoperable with the real world and needs to be interoperable between different blockchains… and if something goes wrong, you need rules on how to fix that problem,” explains Lambert.
He adds that he believes that cross-border payments, trade finance, delivery trade finance insurance and capital markets are all easily won use cases where blockchain-based benefits and tokenization value additions, such as programmability, can provide fluidity, transparency and enhanced transaction experiences.
Digital money will revolutionize transactions
“To scale, you need to bring existing regulated money, central bank backed money, onto the blockchain. That is not done yet,” says Lambert.
After all, the key to scalable success for any ecosystem is having a value exchange medium, a currency that consumers can trust and understand, transact and do what they really want to do.
That is why, according to him, what has been missing from the blockchain puzzle all along has been to bring the traditional financial sector – as well as the emerging FinTech sector – to the table.
“They can’t come to the table today because there is no framework to work in a safe environment,” explains Lambert.
“It will be very interesting to see what happens, because not only do we want to engage with financial institutions, FinTech developers and academia, but we also ask central banks to participate as observers on this so that people see that it is completely transparent. and to develop real-life solutions for this,” adds Lambert.
While highlighting the potential of central bank digital currencies (CBDCs), Lambert acknowledges their limited geographic relevance and broader lack of consumer understanding. He believes that new solutions are needed to scale up existing regulated money and bring it to the blockchain.
“If it’s not scalable, it doesn’t matter,” Lambert notes.
One of the most disruptive concepts enabled by blockchain technology is programmable money, which enables tokenization and programmability around money movements. This means conditions can be embedded in transactions, enabling if-then logic in payments.
Lambert believes the ability to make tokenized deposits programmable gives an idea of what the future of money and payments might look like.
“Taking that kind of if-then logic and integrating it into a payment statement is something that I think has tremendous value for pretty much any industry,” he says.
While Lambert envisions blockchain really becoming like the internet – not just as a way to store and move data, but as a way to store and move value – he acknowledges that there is a “massive trust deficit” in the crypto space.
“This is about people’s money, people’s livelihood. We need to restore trust in the system and we also need to create the right frameworks for financial institutions to play with,” he says.