It was recently announced that global payment giant Visa will allow settling transactions on its network using cryptocurrencies for the first time instead of government-issued and backed fiat currencies. With this move, virtual currencies exchanged online for goods and services will become less obscure.
The Shift Towards Cryptocurrencies
Visa is working to connect merchants, banks, and consumers by allowing the flow of financial transactions through its global payment system in over 200 countries and territories. Until now, Visa has only dealt with government-issued currencies known as “fiat”, such as the dollar, pound, and yen. This means that if a customer buys a cup of coffee using a Visa card linked to a cryptocurrency account, the transaction must first be converted to fiat currency in the settlement process.
Settling Transactions with USD Coin
According to Visa, those transactions can now be settled directly using a stablecoin called USD Coin over the Ethereum blockchain. Stablecoins are digital currencies linked to an external asset, usually a fiat currency, to reduce their volatility. The Ethereum blockchain is a digital database platform that serves as a popular exchange for cryptocurrency operations.
Partners in the Experiment
Visa is currently experimenting with accepting USD Coin at its Ethereum address with two partners: Crypto.com and Anchorage. Crypto.com offers its Visa card and provides a platform that allows users to buy, sell, store, and spend their cryptocurrencies, while Anchorage is the first federally licensed digital bank.
Facilitating Cryptocurrency Transactions
By removing the step of converting cryptocurrencies to fiat currency, Visa claims it saves time and money for businesses operating in the cryptocurrency space. Visa is expected to expand the pilot program to include more partners later this year.
Growing Interest in Digital Currencies
Visa’s efforts to make cryptocurrencies more usable in transactions reflect the growing interest in digital currencies as a daily financial means. Tesla recently announced that it would accept Bitcoin, considered the first cryptocurrency, as a payment option for purchasing a new car, and Federal Reserve Chairman Jerome Powell stated at an event for the Bank for International Settlements that the Fed is still examining the need for its own central digital currency.
The Future of Digital Currencies
In January 2020, the Bank for International Settlements estimated that 80% of central banks worldwide are working on developing their own central digital currencies. Therefore, it seems that the question now is not when central banks and businesses will enter the world of digital currencies, but how they will do so.
Visa’s upgrade of its system to make cryptocurrency transactions smoother is described as “a significant achievement in our ability to meet the needs of fintech companies to manage their operations using stablecoins or cryptocurrencies, which is indeed an extension of what we do every day in facilitating secure payments across various currencies around the world,” according to Jack Forestell, Executive Vice President and Head of Products at Visa. Visa estimates that around $10 billion of USD Coin stablecoins are currently in circulation.
Source: https://www.thebalancemoney.com/visa-takes-first-swipe-at-cryptocurrency-transactions-5119547
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