Visa Now Settles Payments in USDC Stablecoin on The Ethereum Blockchain
- Visa Settles Payments Through the Usage of the USDC Stablecoin.
- In Order To Do This Efficiently, It Uses the Ethereum Blockchain.
- Visa Has Declared That It Is Currently Working with Crypto.com Exchange for the Service in Question.
- The Company Wants to Launch the USDC Settlement Capability Across All of Its Partners Throughout the Year.
Visa has officially announced that it settles payment through the usage of the USDC stablecoin that runs on the Ethereum Blockchain. This means that Visa is one of the first largest payment networks that has adapted to use stablecoins as a settlement currency.
This is important due to the fact that, up until this point, Visa has only ever settled payments through the usage of what is known as FIAT currencies.
FIAT currencies, otherwise known as FIAT money, are a government-issued currency that is not backed by a commodity. FIAT money gives central banks control over the economy because they possess the power to control how much money ends up being printed. However, over the years, this could result in hyperinflation, and this is where cryptocurrencies are here to help.
More specifically, for this new USDC settlement capability, Visa has announced its collaboration with Crypto.com, where they will create a program that lets the crypto firm manage its card business that will entirely be based on digital assets.
Visa’s Chief Product Officer, Jack Forestell, had this to say:
“The announcement today marks a major milestone in our ability to address the needs of Fintech 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.”
This collaboration will surely expand Crypto.com’s already immense user base of over 10 million traders, making Crypto.com’s liquidity pool one of the largest on the crypto market. Openware.com, on the other hand, is working on Crypto.com’s liquidity pool integration into the OpenDAX Exchange Liquidity Network, which in turn makes XLN a more and more attractive crypto liquidity solution as the shared liquidity network continues to grow.
What is USD Coin (USDC)?
The USD Coin or USDC is a type of cryptocurrency pegged 1:1 to fiat (government-issued) money that people commonly refer to as a “stablecoin” due to its ability to allow you to redeem 1 USD Coin for $1.00, which means that it always has a stable price.
The main advantages of the USDC and the reason why Visa has adopted it is probably due to the fact that it retains its value constantly, it’s backed by US dollars, which are held in a bank account, it is powered by the Ethereum blockchain, which makes it an Ethereum token.
This is important as you can store it in any Ethereum-compatible wallet, making it convenient for a lot of people who already have crypto-wallets and have probably used the Ethereum blockchain in the past. It also allows for global transactions, or in other words, it can let dollars move globally from one crypto wallet to other exchanges, businesses, and even people.
The stablecoin itself was co-founded by Circle as well as Coinbase, and in order to ensure that the value of the USDC remains stable, many of its partners keep USD on bank accounts every time they issue new tokens.
To further increase the legitimacy, those accounts are constantly audited to ensure that there are as many USDC in circulation as there is actually USD in the accounts themselves. Otherwise, the coin would be volatile and potentially lose its value, which would completely undermine its intent.
Now you might end up asking yourself, wait a minute, most FIAT money is already digital, so why the need for stablecoins?
To answer this question, you need to know a bit more about cryptocurrencies. You see, stablecoins present a lot of flexibility when it comes to sending, receiving, and even storing value.
This is due to the fact that you do not need a central authority, such as a bank, in order to conduct these payments, and everything can easily be programmed. You also won’t need to enable support for legacy systems or integrate with banks and pay transaction fees to any financial institution, making it a lot less costly to send money on a global scale.
The important thing to note here is that USDC originally had its starting point as being just another token on top of the Ethereum blockchain; however, over time, it managed to evolve and gain support for a few more blockchains, the most notable ones being Stellar as well as Algorand.
Visa and USDC
When it comes to this arrangement’s current status, Visa actually supports around 160 currencies that is impressive by itself. This is the main reason why you might see Visa as a supported payment option in anything you end up buying online, as the currency can easily travel from one place to another and be converted on the fly. This means that you’ll essentially possess the ability to send money in your own currency, while the merchant can receive money in their own currency.
Obviously, it would help if you had a system and workforce in place to process all of this and make the conversion. This means that a third party needs to be compensated, either for the computing power, bandwidth, and power consumption or for the physical human’s salary, alongside other things, that results in a fee. With Blockchain technology, specifically the Ethereum blockchain, this no longer needs to be the case.
Visa has plans for the future as well. After further testing and additional conversations with the clients, partners, and members of the regulatory community, the company intends to launch a USDC settlement for other partners.
Over time, this could result in the ability to settle payments in central bank digital currencies or CBDCs.
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