MasterCard Acquires Patent for Management of Blockchain Currency’s Fractional Reserves


Mastercard has acquired a patent for fractional cryptocurrency banking, which indicates that the company wants a management system for fractional reserves of Blockchain currency.

Filed on June 29 of this year, the patent pertains to “the use of centralized accounts to manage fractional reserves of fiat and blockchain currency updated via transaction messages corresponding to fiat- and blockchain-based payment transactions.”

Mastercard senior consultant of research & development Steven Charles Davis, the inventor, stresses the need for such a system.

Transactions executed on the Blockchain are time intensive because of the computer processing time and resources needed to authenticate and update the Blockchain. This poses a problem to customers and merchants, specifically on the part of the payee who “must rely on the payer’s good faith that their transfer will be valid.”

The document indicates:

“In such latter instances, the anonymity of the blockchain may leave the payee at a disadvantage, because the inability for the payee to identify the payer may prohibit the payee from utilizing various risk or fraud detection methods.”

The paper also says that it can be hard for consumers to adopt, or even understand, Blockchain currencies. It adds that its anonymous nature may leave consumers “unable to prove their identity and ownership of a wallet,” hence with “little recourse if their wallet and/or associated currency is stolen.”

Mastercard’s fractional reserve system for blockchain is focused on improving the storage and processing of transactions through the use of current payment networks and payment systems technologies, combined with Blockchain currencies.

Davis disputes that the introduction of the system has the ability to “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 system for handling fractional reserves of Blockchain currency is composed of receiving transaction message related to payment transaction; distinguishing a particular account profile recorded in an account database, which contains the specific address, a fiat currency amount, and a Blockchain currency amount; and updating the Blockchain currency amount contained in that particular account profile.

Recently, Mastercard President and CEO Ajay Banga branded digital currencies as “junk.” He also cited its intense market volatility and its popularity among cybercriminals. Banga also emphasized that virtual assets do not deserve to be considered as a medium of exchange.