Israeli Fintech Kima and Mastercard Lab Collaborate to Develop ‘DeFi Credit Card’

Israeli fintech company Kima and Mastercard’s FinSec Innovation Lab have initiated a project aimed at bridging decentralized finance (DeFi) tools with traditional financial services, including credit cards and bank accounts. The endeavor, supported by the Israel Innovation Authority, is designed to bring the concept of a “DeFi credit card” to fruition.

Kima’s Blockchain Expansion

Kima, a peer-to-peer money transfer and payment protocol, operates a blockchain that does not use smart contracts, which it describes on its website as “buggy and experimental.” The company plans to expand its existing protocol and launch a mainnet and token by the second quarter of 2024. FinSec will play a significant role in this initiative by operating a Kima node and becoming a key shareholder in the network.

Supported by the Israel National Cyber Directorate, the Finance Ministry, and the Innovation Authority, FinSec collaborates with fintech and cybersecurity startups. The partnership with Kima, announced in July 2023, focuses on creating a bridge between DeFi and traditional finance, aiming to help users overcome technical and regulatory barriers to DeFi adoption.

Eitan Katz, co-founder and CEO of Kima, emphasized the importance of accessibility and security in the adoption of blockchain and DeFi technologies. According to Katz, these technologies will only gain traction outside the niche world of Web3 if there is a secure, affordable, and easily accessible way to integrate blockchain networks with traditional financial systems. Kima has been expanding rapidly, announcing six integrations and 18 new partnerships in 2024, including ventures in Vietnam and Thailand. The company has also joined the incubator of the artificial intelligence protocol ChatGPT, utilizing AI in its liquidity management algorithm. 

Mastercard’s Blockchain Initiatives 

Mastercard, meanwhile, is advancing its blockchain initiatives through various collaborations and projects aimed at integrating blockchain technology into mainstream financial services. Recently, Mastercard partnered with major U.S. banks, including Citigroup, Visa, and JPMorgan, to test distributed ledger technology for banking settlements using tokenization.

This collaboration aims to explore the potential of a shared-ledger technology called the Regulated Settlement Network (RSN), which allows tokenized assets such as Treasurys, investment-grade debt instruments, and commercial bank money to be settled collectively on a single platform. This initiative is expected to enhance the efficiency and security of financial transactions by leveraging blockchain to modernize the banking infrastructure.

In Europe, Nexo, a leading DeFi platform, has launched a new crypto Mastercard for citizens in the European Economic Area (EEA). This innovative card enables users to spend their cryptocurrency holdings directly, with automatic conversion to fiat currencies for payments. The launch of this card underscores the growing integration of cryptocurrency into everyday financial activities, providing a seamless way for consumers to utilize their digital assets. The partnership between Nexo and Mastercard represents a significant step towards mainstreaming crypto-based financial products.

Innovation in Central Bank Digital Currencies (CBDCs)

Furthermore, Mastercard is fostering innovation in central bank digital currencies (CBDCs) through a collaborative program involving prominent blockchain companies like Ripple and ConsenSys. This program is designed to explore and promote the development of CBDCs, offering a platform for various stakeholders to research and develop secure and efficient digital currency solutions.

By involving industry leaders in blockchain technology, Mastercard aims to address both the potential benefits and challenges associated with CBDCs, thereby paving the way for their broader adoption and implementation.

These initiatives highlight Mastercard’s commitment to leveraging blockchain technology to enhance financial services, improve transaction security, and promote the adoption of digital currencies. Through strategic partnerships and innovative projects, Mastercard is positioning itself at the forefront of blockchain integration in the financial sector.