VISA Trialing USDC Settlement – Eyes Future Support for CBDCs

A fresh announcement from Visa has moved markets today.  The payment processing giant let news break that it is actively trialing the use of stablecoins in the settlement of transactions on its network.

Settling in USDC

For the time being, this capability is being trialed in a pilot program involving both Crypto.com and Anchorage.  The stablecoin of choice is none other than USDC – the second largest coin of its type available in today’s markets.

“Visa’s standard settlement process requires partners to settle in a traditional fiat currency, which can add cost and complexity for businesses built with digital currencies. The ability to settle in USDC can ultimately help Crypto.com and other crypto native companies evaluate fundamentally new business models without the need for traditional fiat in their treasury and settlement workflows. Visa’s treasury upgrades and integration with Anchorage also strengthen Visa’s ability to directly support new central bank digital currency (CBDC) as they emerge in the future.”

Visa indicates that its choice of USDC was predicated on 3 requirements – Demand, stability, and security.  All three of which were satisfied by USDC.

Close Ties

Notably, Anchorage, the first federally chartered digital asset bank in the United States, played a pivotal role in Visas first transactions settled with USDC.  More specifically, Anchorage acted as a custodian throughout the process.

This close tie between Anchorage and Visa has been established over a period of time.  Not only have we seen Visa participate in a past capital raise by Anchorage, but the later is also playing a role in Visas ‘crypto API suite’.

Future Plans

Bringing the capability to settle transactions with USDC is only the tip of the iceberg for Visa.  The company has previously announced that it is considering allowing the use of crypto currencies at all of its supported merchants – a move that will truly mark the mainstream adoption of digital assets.

In addition to this planned support, Visa recently began working with its aforementioned ‘crypto API suite’.  The purpose of which is to act as a bridge between traditional banks, and the world of digital assets.

If these plans weren’t enough, Visa has now indicated that its trialing of stablecoins in the settlement process is simply a first step towards preparing for the eventual crop of central banks digital currencies (CBDCs) set to hit market in the coming years.

“The implications of our work with stablecoins are potentially far reaching — enabling our ability to one day support new Central Bank Digital Currencies (CBDC) as they become available. Central Banks are ramping up CBDCs, with 80% reporting that they are engaging in some CBDC-related effort, according to research from the BIS. We are committed to supporting these initiatives so they can be integrated into the existing payments ecosystem.”

Market Reaction

With Visa being the payment processing giant that it is, any move it makes has the potential to has widespread effects.  As such, the overall cryptocurrency market did not disappoint.  At time of writing, the entire market was riding a 4.5% boost over the past 24hrs.

Industry mainstays echoed this boost, showing similar figures.

Bitcoin                     +4.40% in 24hrs

Ethereum                +5.13% in 24hrs

Litecoin                   +6.32% in 24hrs

Competition Inbound

With the progress being made at Visa, and its support for digital assets, the pressure is rising for rivals such as MasterCard.

Similarly, While Tether remains the worlds largest stablecoin, its grasp on the top spot is beginning to look increasingly tenuous with time.  A mere year ago, USDC was barely a blip on Tether’s radar – now it is the 12^th ranked asset, and boasts a market-cap of over $13 billion USD.