Mastercard to buy CipherTrace as bet on crypto deepens

Fintech updates

Mastercard has agreed to buy blockchain analytics company CipherTrace, which sells cryptocurrency anti-money laundering services, as the payments company deepens its bet on digital assets.

The deal will allow Mastercard to “differentiate its card and real-time payments infrastructure” by helping its customers to comply with regulations as they increasingly “build their own virtual asset offerings”, the company said on Thursday. The terms of the deal were not disclosed.

The ability to hold most cryptocurrencies anonymously has made them attractive to criminals that are looking to launder dirty funds. However, every transaction is typically recorded on an immutable blockchain, leaving a visible trail for researchers.

CipherTrace is one of an increasing number of crypto forensics start-ups that use sophisticated technology coupled with human intelligence to analyse blockchain transactions, helping companies and law enforcement monitor suspicious activity and map out the crypto-criminal ecosystem.

The deal comes after Mastercard announced in February that it would start supporting selected cryptocurrencies directly on its network this year, following in the footsteps of fintech rivals PayPal and Square. Meanwhile, US regulators are increasingly circling the growing but loosely regulated industry.

“Digital assets have the potential to reimagine commerce, from everyday acts like paying and getting paid to transforming economies, making them more inclusive and efficient,” said Ajay Bhalla, president of cyber and intelligence at Mastercard.

“With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”

Founded in 2015, CipherTrace was initially funded by the US government’s Department of Homeland Security and Defense Advanced Research Projects Agency and is backed by Silicon Valley investors, including WestWave Capital and Third Point Ventures.

According to its website, it has 150 customers, including banks, cryptocurrency exchanges, agencies and regulators. Rivals include New York’s Chainalysis, which raised $100m at a more than $4bn valuation earlier this year, and London-based Elliptic, whose investors include Wells Fargo.

“This is a real coup for the legitimisation of the industry in financial services,” Dave Jevans, CipherTrace’s chief executive, told the Financial Times.

Mastercard said that the acquisition was part of a wider strategy “in the digital assets space to help provide customers, merchants and businesses with more choice in how they move digital value” and follows a number of similar investments.

Earlier this year, Mastercard announced that it was partnering with US crypto exchange Gemini, founded by the Winklevoss twins, to launch a crypto rewards card. It has similar initiatives with Uphold and BitPay. It also said that it had invested in ways to support the growing market for non-fungible tokens, or NFTs, and was developing platforms to test central bank digital currencies.

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