Visa announced on Monday, March 29, 2021, that it will support USD Coin (USDC), a stablecoin backed by the US dollar, on its settlement platform. Visa became the first major payments network to conduct a transaction using USDC to settle a transaction over Ethereum, a popular open-source blockchain.
The payment giant is partnering with Crypto.com, a leading cryptocurrency and payment platform, for the settlement transaction. Besides, Visa is also collaborating with Anchorage, the first federally chartered digital asset bank, to set up a pathway for digital currency settlement within Visa’s existing treasury infrastructure. Visa also intends to support the new central bank digital currency (CBDC) in the future for which it has upgraded its treasury and its integration with Anchorage.
In a statement, Visa said the “support for digital currencies as a new type of settlement currency” is a key step for the company’s network strategy which aims to “enhance all forms of money movement, whether on the Visa network or beyond.”
Visa seeks to add “differentiated value to the ecosystem and making cryptocurrencies more secure, useful and applicable for payments” by utilizing its global presence, partnership approach, and trusted brand.
Jack Forestell, executive vice president and chief product officer at Visa, said that crypto-native fintechs wanted partners who understand their business and the complexities of digital currency form factors.
“The announcement today marks a major milestone in our ability to address the needs of fintechs managing their business in a stablecoin or cryptocurrency, and it’s really an extension of what we do every day, securely facilitating payments in all different currencies all across the world,” he added.
Kris Marszalek, co-founder and CEO of Crypto.com, said that they needed partners who understand “the opportunity and the tools” that will help the company to get market “faster and more efficiently.”
“Having been a Visa partner for several years, we’re excited to deepen that relationship through our global agreement and to pioneer an exciting world-first in stablecoin payments,” he said.
Through the recent move, to use USDC in its settlement platform, Visa focuses to adapt its network “to accommodate new form factors for money” which is inspired by Visa-founder Dee Hock’s vision to build “the world’s premier system for the exchange of value.”
What is a settlement transaction?
Visa describes “settlement” as the unsung hero of the payment lifecycle.
When you use your Visa card to buy goods at stores, the payment occurs through various steps such as the conversion of currencies, linking with relevant banks and deposition of funds into the store’s bank account. This is how the store (merchant) receives funds from you (a customer) for a transaction, which is known as a settlement transaction.
The role of Visa during this process is to make sure all the steps take place to enable the transaction. Visa collaborates with Crypto.com and Anchorage while settling a transaction in USDC.
Crypto.com converts digital currencies into an acceptable traditional fiat currency. And, Anchorage helps to manage business between Visa and crypto-native companies in digital currency.
“Crypto.com wants to enable millions of consumers across the world to access and use digital currencies,” Kris Marszalek, CEO and Co-founder at Crypto.com, said. “Partners like Visa who have the capability to directly accept and interact with digital currencies help enable us to maximize the benefits of digital currencies.”
Diogo Monica, co-founder and president of Anchorage, said that Visa approached Anchorage in 2019 with the idea of settlement payments in digital currency. “This would give the next generation of crypto native issuers the option to directly settle with Visa in a digital currency over a public blockchain,” he said.
Why did Visa choose USDC for its settlement platform?
Visa looked basically for three things while trying to identify its first digital asset. Firstly, it was concerned about what its clients were interested in for assets during a transaction. Secondly, the payment giant, looked for the stability of the asset if its price was volatile and its conversion mechanism was viable or suitable. And, lastly, the company studied the security of the asset. Having examined thoroughly, USDC came out to meet all the criteria.
USDC is also one of the largest stablecoin. It has a market cap of almost $10 billion.
Furthermore, Visa is impressed by USDC’s regulatory compliance.
Visa is focusing to support CBDC in future
Visa is looking forward to expanding its involvement with stablecoins on a long-term basis. The company said that it is enhancing its system and partnership to be able to support new Central Bank Digital Currencies (CBDC) once they are available.
“At Visa, we are on a mission to connect the world through the most innovative, reliable and secure digital payment network—and we’re continuing to push the boundaries of that network by connecting to public blockchains and new forms of money,” Visa said.
“We’re proud of the work we’ve done so far and excited about what the future holds,” the company added.