Visa Implements Stablecoin Payment On The Ethereum Blockchain
Visa- one of the world's top multinational payment processing companies, has continued to make efforts at incorporating cryptocurrencies into its operation framework. It is particularly one of the companies that thinks bitcoin and many of the altcoins have a future- as far as payment settlements are concerned. This is in contrast to what is obtainable with many fiat currency operators around the world, who are still having a hard time coming to terms with cryptocurrency use.
Note that in January 2021, the Visa company’s CEO- Al Kelly, had reassured members of the public of its carefully designed strategy for facilitating bitcoin payments amongst its users. Two months after, the company has announced that it had accepted its first cryptocurrency payment in USDC- over the Ethereum network.
Now, Visa's resolve to back cryptocurrency use is seen as a huge plus for the digital currency market. Considering the high-level impacts this has on cryptocurrencies, the company has been closely monitored by cryptocurrency analysts and stakeholders. Note that the USDC is a project of Centre consortium, but implemented over the Ethereum blockchain.
How Visa intends to utilize the Ethereum blockchain
Currently, Visa aims to incorporate a cryptocurrency framework that is both fast and safe.
Visa has no primary agreements with Ethereum- the blockchain company. However, users of Centre consortium’s USDC would be doing so on the Ethereum solidity blockchain. Note that although USDC is also powered by Algorand and Stellar blockchain protocols, Visa only makes use of the Ethereum based version.
The entire framework arrangement also involves Anchorage- America's first OCC recognized digital asset bank. This digital asset bank would serve as an intermediary for collecting USDC payments on behalf of Visa. Consequently, Visa has a wallet address opened with the bank, and in which its remittances would be collected.
Hence, if a buyer were to make payments to a merchant in a different country, they simply make payments in USDC, directly to Visa's wallet address at Anchorage. Once the payments have been made, Anchorage notifies Visa about the transaction, after which Visa proceeds to pay the receiving merchants- in their local currencies.
This arrangement seems great, especially considering the way it impressively connects cryptocurrency and fiat currencies. So far, only crypto.com has been allowed to use this service. Visa has indicated that it would add more users and partners in the months to come. Note that the solution makes payment processing even faster, and users would also get to spend less on transaction fees, currency exchange rates, etcetera.
Asides from the USD coins that would fuel the transactions, the Anchorage bank is also a pivotal aspect of the framework. The bank provides the needed centralized structure that Visa needs for tracking its transactions. Implementing a cryptocurrency payment solution may not have been effective without a proper means of tracking payments and where they came from.
Effects of the Visa Ethereum partnership for cryptocurrency adoption
The Visa Ethereum partnership has been described as one of the biggest positive drivers of cryptocurrencies. Hence, it was not surprising that Bitcoin and Ethereum both experienced a price surge of about five percent each, in the wake of the news. Visa has become important for the cryptocurrency space, because of the company’s huge influence on payment processing in several countries.
There is a tendency for more people to use cryptocurrency if Visa makes it one of its payment options. Thus, it is reasonable to assume that cryptocurrency adoption would go up, considering the massive user network of the company. Although Visa is not likely to ultimately make USDC (or cryptocurrencies) the only payment option, a lot of people might prefer it to fiat settlements. This tendency would also help improve public perception and trust for cryptocurrencies- especially amongst the older folks.
By these, Visa would also be possibly paving the way for cryptocurrency use, even in the places where they were once restricted. This is another scenario where the company’s influence comes to play. Since the company has become an essential service provider for millions of customers in several countries, banning its activities may not be so easy. Another good thing is that other top payment processors like MasterCard and PayPal have also started adding cryptocurrencies to their operation frameworks. This leaves countries with fewer options for effecting transnational transactions and governments may need to bend their rules at some point.
On another hand, Ethereum may benefit nicely if USDC gains more users. Since Ethereum gas is required for USDC transactions, an increase in daily transactions would lead to heavy gas usage- which could cause the Ethereum price to jump up by some bits.
Going by the recent events, Visa is likely to focus mainly on using USDC alone, at thus time. This is a good step, considering that stablecoins are directly backed by the dollar, and they have relatively less volatility than regular cryptocurrencies. This means that users are assured of the financial value retention of their digital currencies. With this, conservative users may now feel comfortable using cryptocurrencies.
Now, although price changes for stablecoins are quite negligible, an increase in trading volume may be a sign that there are more buyers than sellers. Note that trading volume for the USDC was observed to increase remarkably after Visa concluded its first cryptocurrency payment settlement involving crypto.com.
A few analysts have suggested that the company may subsequently support other stablecoins asides from USDC. This is not impossible, since there are other stablecoins that are also hosted on the Ethereum blockchain. As the months go by, it shouldn’t be surprising if Visa becomes a major cryptocurrency stakeholder. It can easily achieve this if it can accumulate a large reserve of stablecoins courtesy of all the transactions it would facilitate.
Right now, the possibilities are endless. Asides from its collaborations with Anchorage™, Visa is also making other strategic partnerships. The company has been in talks with several top digital currency outfits like Coinbase, Bitpanda, BlockFi, etcetera. These partnerships alone would grant the company access to an additional 50 million potential users of its ingenious cryptocurrency-enabled payment framework.
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