On March 29th Visa announced it would allow payment settlements using cryptocurrency (source: Reuters). There have been many articles on the announcement but, strangely enough, not many mention what cryptocurrency will be the real beneficiary of that news.
Visa will settle payments using the USDC stable coin. It is important to understand what a stable coin is. A stable coin is a cryptocurrency whose value is pegged to the US dollar, gold or other financial products. In this case the USDC (USD Coin) is only pegged to the US Dollar.
There are many stable coins out there and the one with the biggest market capitalization is the infamous USDT or also referred to as Tether. USDT is controversial because backed by different financial instruments (USD, Gold and more) and its auditing process is not as transparent as investors would like it to be, which earlier this year triggered an investigation into iFinex, Tether’s parent company, by the SEC (source: Financial Times).
USDC conversely is an open-source project that works within US money transmission laws, and uses established banks and external auditors.
This move of Visa is motivated by the fact that major financial institutions (including BNY Mellon, BlackRock Inc, Mastercard Inc and more) have embraced some cryptocurrencies. Here is a quote from Guy Sheffield, the head of Crypto at Visa:
We see increasing demand from consumers across the world to be able to access, hold and use digital currencies and we’re seeing demand from our clients to be able to build products that provide that access for consumers
While this is exciting news for the cryptocurrency asset class in general, the real winner here is Ethereum! Why? Because USDC is based on the Ethereum blockchain and this means that Visa will have to use Ether and pay the Ethereum network to complete the settlements. As Ryan Sean Adams (a crypto investor) says, “Visa is now an Ethereum sidechain”.
Before this announcement, customers who used crypto credit cards (like the ones offered by Crypto.com) to pay for their goods and services would have their cryptocurrencies converted to “fiat money” (traditional money) and this came with fees and a certain complexity.
With Visa’s latest change there is no longer a need to convert to fiat, as the transaction is directly settled in the USDC stable coin and this is big news!
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