Financial services giant Visa has announced plans to use a US-dollar-backed cryptocurrency on its payments network.
In a pilot programme, Visa will use USD Coin to settle transactions over cryptocurrency Ethereum’s blockchain.
USD Coin was launched in 2018. Unlike other cryptocurrencies, it is a stablecoin, meaning its value is pegged to an external reference, in this case the US dollar. As such, it uses blockchain technology to make online purchases and can also be freely converted back into US dollars.
“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,” said Visa Executive Vice-President and Chief Product Officer Jack Forestell.
The pilot programme will be launched in collaboration with Crypto.com, a payment and cryptocurrency platform. It will also use a platform developed by digital asset bank Anchorage.
Under Visa’s standard settlement process, partners need to use traditional currencies when settling their obligations. Under the scheme, Crypto.com will instead be able to send USD Coins to Visa to settle obligations as part of the Crypto.com Visa card program.
According to Visa, this will help companies that use cryptocurrencies without the need for converting to traditional currencies.
Co-founder and CEO of Crypto.com Kris Marszalek said: “We’ve seen record-breaking growth in our business and the broader crypto ecosystem over the last years. To continue accelerating the world’s transition to cryptocurrency, we need partners who understand the opportunity and the tools that will help us get to 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.”
While the service will be limited at launch, Visa said it will offer the service to more partners later this year.
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Visa’s plans pushed cryptocurrency prices higher in the last few days. Bitcoin rose from around $55,000 to over $58,000, while Ethereum saw similar growth from around $1700 to over $1800.
This year has seen Bitcoin, and by extension other cryptocurrencies, move into the mainstream and see record growth in value. Bitcoin set multiple new records in 2021, reaching $34,000 in the first week of January, peaking at $57,000 in February and then setting its current record of $60,000 in mid-March.
This eclipses its previous record of around $17,500 in December 2017.
Compared to then, the big difference now is the presence of big businesses. 2017’s record was largely driven by early adopters, individual tech enthusiasts looking to invest.
Now, established investors and hedge funds, seeing the investment potential of Bitcoin, have been driving the price up.
As such, as more and more companies show interest in investing in or utilising cryptocurrencies, their value is rising.
While for the most part, the value of cryptocurrencies has been driven largely by speculative investment, in recent months, companies have been finding real-world uses for it. Paypal, for example, announced in October last year that it would allow customers to use their accounts to trade a range of cryptocurrencies.
Later, in February, Tesla announced that it was considering accepting Bitcoins for its vehicles. This came on top of a $1.5-billion investment in the cryptocurrency.
However, cryptocurrencies will need to find an equilibrium between being an investment and a practical currency. There is a famous example of a man who paid 10,000 bitcoins in 2010 for two pizzas, which would be valued at close to $600 million at current Bitcoin prices.
As such, nobody is likely to spend a bitcoin if they believe it will be worth more in a month’s time.