US credit card-issuing company Visa announced on Monday its intention of facilitating crypto payments through its network.
Visa Completes First Crypto Pilot Test
Visa strategic partner Crypto.com did a pilot transaction with the crypto firm settling a portion of its debts in US Dollar Coin (USDC), a “stablecoin” pegged to the US Dollar 1 to 1.
The transaction was completed over the Ethereum network- a decentralized blockchain offering that has nurtured decentralized finance (DeFi) and non-fungible tokens (NFTs).
Visa is fast-tracking its plans to enable more of its strategic partners to enjoy this feature later on in the year.
The move, which is described as an industry-first merge of digital and fiat-focused institutions, is riding on the back of an upsurge in cryptocurrencies worldwide.
Wider adoption has seen legacy banks like the Bank of New York (BNY) Mellon, investment company BlackRock Inc. and the fellow US credit card company MasterCard embracing digital currencies in the past month.
This rise in institutional demand for crypto-assets has been fostered mainly by the foremost cryptocurrency Bitcoin, which has made significant rallies in the past year. In a show of faith and growing acceptance, Tesla placed $1.5 billion worth of investments into Bitcoin in early February.
In a subsequent announcement, Tesla boss Elon Musk said BTC will now be accepted in exchange for Tesla’s all-electric autonomous sedans. This move has seen BTC make new ATHs climaxing at $61,000 last week.
Visa’s latest move sees it address a significant problem plaguing crypto’s adoption. Usually, if a crypto owner pays for purchases from his crypto wallet, the digital asset needs to be converted to fiat at the end of the day.
This would lead to additional costs at the point of conversion. With this latest offering, Visa would enable its partners to settle their financial obligations using USDC, making it far easier for funds to be moved between entities.
The US payments giant has been making digital headway into the crypto-economy for some months now. In a new partnership with the first federally chartered digital bank Anchorage, Visa received its USDC funds in the company’s Ethereum address with the crypto company serving as the custodian.
Visa Eyes CBDCs Use On Its Platform
This pilot test is significant for the US payments firm as it leads to the adoption of digital assets for daily transactions. The company is also looking to benefit from the frenzy surrounding central bank digital currencies (CBDCs). The digital assets sanctioned by the host country’s apex bank draw much interest from financial bodies globally.
In a recently published report, the Bank of International Settlements noted that over 80% of global central banks actively explored a digital version of their national currency. With this growing interest, Visa published a whitepaper in which it proposed a CBDC facility where transactions can be executed without the need for an internet connection.
According to the San Francisco firm, the growing adoption of cryptocurrencies is forcing them to ask many questions, and CBDCs could be a way they can provide the needed answers.