Mastercard Files Patent to Centralize Cryptocurrency Transactions, Calls out Bitcoin's Wait Times

In the latest development, U.S. payments processor Mastercard filed a patent applying the concept of fractional reserve banking to cryptocurrency payments.

Published on Oct. 25 by the U.S. Patent and Trademark Office, the application details a novel payment processing method to allow fiat- and crypto-payments for both merchants and retailers, alongside simultaneous storage facilities for both currency types.

Mastercard refers to "Blockchain currencies" throughout the document, specifically to manage their "Fractional reserves." The term refers to an age-old banking practice - which allocates only a small portion of stored as "Actual cash on hand" while maintaining a more substantial portion for other purposes, such as lending money to other parties and investments.

As per details, Mastercard intends to link each blockchain transaction to a corresponding digital framework where the identities of each sender and receiver are stored.

The patent goes on to describe how a blockchain-based system may work, which mostly parrots the operational mechanism of cryptocurrencies.

The patent highlights the use of the same computing mechanism for both fiat- and crypto-transactions, meaning merchants would not require separate devices to accept digital currencies.

The payments giant also refers to Bitcoin's infamous "Ten minute wait time" for processing transactions, and notes the process could be made faster if the risk of each transaction is assessed before the transaction is attempted - by checking for sufficient funds.

The patent filing may take members of the cryptocurrency community by surprise.

Avoiding the concept of fractional reserve banking is one of the primary reasons that Bitcoin was created, and Mastercard intends to apply the method to the growing crypto-finance sector.

Moving away from centralized bodies to process transactions forms another ethos of cryptocurrencies, which Mastercard views as a fundamental problem and hopes to launch its crypto-security solutions.