In the latest proof of growing acceptance of digital currencies, Visa, Inc. has announced that it will permit the use of the cryptocurrency USD Coin in order to settle all its transactions within its payment network. This will take place in collaboration with the payment and crypto platform, Crypto.com. Visa also plans to offer this option with future partners later in the year.
The USD Coin (USDC) is a stablecoin currency and its value is “pegged directly” to the U.S. dollar. What this entails is that the USD Coin is “redeemable on a one-to-one basis for U.S. dollars.” This makes the currency favorable for retail financial transactions.
The Cryptocurrency Trend Is Up
Bitcoin has enjoyed a banner year in 2021. Shortly after Tesla CEO Elon Musk promoted his interest in Bitcoin by investing in the currency, the market value exceeded $50,000 in February. Musk also announced that customers can now purchase Tesla vehicles using Bitcoin.
After dipping a few times, hovering around the $50,000 mark, the month of March saw one of its biggest boosts, surging past $60,000 due to the growing number of companies investing in Bitcoin. Other financial backers include BNY Mellon, Square Inc., and Mastercard.
Cuy Sheffield, head of Crypto at Visa, said:
“We see increasing demand from consumers across the world to be able to access, hold and use digital currencies and we’re seeing demand from our clients to be able to build products that provide that access for consumers”.
Visa’s Upgraded Infrastructure
Visa and Crypto.com have been partnering on a crypto-based rewards debit card for several years. However, settling those transactions were problematic as Crypto.com was required to convert all cryptocurrency transactions back to fiat currencies like the U.S. dollar.
The entire operation was complicated, costly, and time consuming. In response, Visa allowed settlements in cryptocurrency via a public blockchain, using its partner Anchorage. Anchorage is considered the first “federally chartered digital asset bank”.
It took a total of two years for Visa to completely revamp its payment infrastructure. The launch of this new program uses the USD Coin, which is “powered” by Ethereum.
By using the Ethereum blockchain, it eliminates the need to convert digital currency into traditional payments. This new network works “at-time-of-sale” and therefore the settlements are instantaneous. There is no need to wait till the end of the day to realize the transaction.
Another benefit of using USD Coin is that it is backed up by strict compliance and regulatory procedures in place. This increases its appeal as it is not a traditional cryptocurrency where they are mostly unregulated and decentralized.
Visa will not end with USD Coin, as it hopes to adopt more stablecoins within its current settlement platform. The company also has plans to include central bank digital currencies or CBDC when they become available. CBDCs are digital currencies that are distributed by a country’s own central bank to its citizens.
Cryptocurrencies Heading Towards Mainstream Use
Although many countries are looking into the concept of CBDCs, there are several countries who have already adopted and are in the development stages of building their CBDC framework.
The Bank for International Settlements has discovered that almost 80% of countries’ central banks were involved in some aspect of the CBDC initiative in 2019.
Although Bitcoin has paved the way for cryptocurrencies, it is believed that the USD Coin will be the one heading the initiative for widespread adoption and use.