Multiple news sources have declared Visa the crypto leader based on a Visa press release announcing that it used a stablecoin backed by the US dollar (USD Coin) to settle a transaction with Visa over Ethereum. From the Visa press release and blog, it appears that the transaction was performed with a Crypto.com-issued Visa card.
The press release doesn’t state what merchant accepted the card or the value of the transaction, however, the settlement funds came from Anchorage, the first federally chartered digital asset bank. Because the settlement was made using a stablecoin pegged to the US Dollar (USD Coin), no exchange rate had to be calculated and executed.
There is a lot of heavy lifting going on here. Connecting the Visa settlement and treasury functions to Anchorage, even for a one-to-one stablecoin as the first test, is a substantial understaking in risk management. Of course it will be even more difficult to enable more popular crypto assets that fluctuate in value:
“On Monday, Visa said it accepted a virtual currency payment for the first time, marking a milestone for the 62-year-old company. Specifically, the payments giant settled a transaction using cryptocurrency plumbing known as the Ethereum blockchain, a distributed accounting ledger based on the technology behind Bitcoin.The transaction involved a Visa partner, Crypto.com, a Hong Kong-based issuer of cryptocurrency-backed prepaid cards, sending Visa a U.S. dollar-pegged virtual currency called USD Coin, or USDC. Visa said it worked with Anchorage, a Visa-backed cryptocurrency startup that is one of the U.S.’s newest federally chartered banks, to accept the payment.
Visa said the move is part of a pilot program to make life easier for cryptocurrency businesses. Visa wants to eliminate the hassle of it requiring customers to convert their cryptocurrency holdings into fiat currency, like U.S. dollars, before settling up their accounts on the Visa network. The company said it plans to expand the feature to other members of its payments networks, and potentially to other virtual currencies, later this year.
This is the latest in a string of cryptocurrency-related announcements for Visa. Earlier this month, Visa CEO Al Kelly told Fortune CEO Alan Murray that Visa is working to let people to buy Bitcoin and to make payments using Bitcoin through the Visa network, following the lead of financial tech, or fintech, companies like PayPal and Square. In February, Visa introduced a product to help banks integrate Bitcoin into their mobile apps.
Visa is one of several payments giants looking to capitalize on the latest cryptocurrency craze. Ajay Banga, the chairman and former CEO of MasterCard, Visa’s perennial rival, recently told Fortune he’s less interested in Bitcoin but very keen on the potential for central bank digital currencies, a government-backed variety. Meanwhile, younger businesses, such as PayPal and Square, are all seeking to place themselves at the forefront of the Bitcoin bull run.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group