Mastercard Patent Claims Cryptocurrency Can Benefit From Fractional Reserve Banking

U.S. multinational financial services corporation Mastercard wants to apply principles of fractional reserve banking to cryptocurrency, a new patent application published Thursday, Oct. 25 reveals.

According to the document, published by the U.S. Patent & Trademark Office (USPTO), the payment processor has plans to allow merchants to interact with what it calls “blockchain currencies” via a new method of simultaneous crypto and fiat storage.

Specifically, reference is made to “methods for managing fractional reserves of blockchain currency.”

Mastercard has offered a mixed public stance on cryptocurrency in recent years, this month winning a further blockchain-related patent, while signalling along with Visa it may classify cryptocurrency and ICOs as “high risk.”

In its new filing, the company appears to wish to apply principles of the fiat banking system, which it considers “are specially designed and configured to safely store and protect consumer and merchant information and credentials.” The patent filing continues:

“[...]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 security of account information and provide a strong defense against fraud and theft.”

The concept may take some commentators by surprise, as fractional reserve banking – where there is not proof that a lender has the funds which correspond to a customer’s promised holdings – already has a transparent solution in Bitcoin.

Noble Bank, the former main reserve bank for cryptographic stablecoin Tether (USDT), notionally pegged to the U.S. dollar, had claimed it did not use fractional reserve and could prove it had one dollar for each USDT token, though the stablecoin project has avoided going through a public audit.