Visa’s New System to Allow Crypto Payments

Visa is trying to work on crypto’s challenges with interoperability.

Bitcoin (BTC) entered the market in 2009, expected to operate as an intermediary-free digital payment system. Nowadays, Bitcoin is no longer the only cryptocurrency, joined from more than 12,000 other types which cover all industries, starting from supply chains to payments in digital form.

Now, where do Visa’s payment methods come into play? Wherever Visa is slightly involved, it dives right into it.

Cross-chain Payment Method Proposal

New plans for a Universal Payment Channel released from Visa this week, a channel that acts as the center and connects an abundance of blockchain networks. In addition, this Universal Payment Channel will give the opportunity to safely transfer digital currencies.

The channel is still not completed, however, it is promised to be the solution towards many crypto interoperability problems, as stated by the research group of Visa.

What does that mean? Currently, a big number of blockchain ledgers cannot transact with each other because they operate in isolation. For instance, if you were to go to an Ethereum based network and pay with Bitcoin, you might be faced with difficulties. This would be just like not being able to transfer money from one bank to the other.

In such cases, interoperability would come to the rescue. If we leave interoperability out of the question, crypto digital assets will never get to their full potential. Therefore, Visa, among many other organizations is seeking solutions to this.

DOT, AVAX, ATOM, MATIC are among the cryptocurrencies that work like this. These aforementioned names have already come up with solutions, however, it is still a question whether only one of them or more than one will be the key provider of interoperability.

Focus on CBDCs

It is interesting to note that this new proposal by Visa is equally focused on CBDCs and cryptocurrencies. CBDCs, short for Central Bank Digital Currencies, are also called govcoins, and as the name tells they are digital currencies backed by the government.

Using blockchain technology to create virtual currencies seems like an attractive option for a number of governments. The Federal Reserve is exploring the good sides that a digital dollar would bring, whereas China has been testing a digital yuan for some time now.

Visa’s involvement with the issue makes it known that they are expecting a future where these govcoins will have a significant role. Crypto traders should pay close attention to this. While govcoins will have the same good sides of current digital currencies – inexpensive and fast transactions – they are free from the risk of coin failure.

Anyway, govcoins are not completely without problems either. They part ways with cryptocurrencies in one key element, decentralization, as they do not have it. Decentralization means that there is no need for a third party like the government or the bank. In addition, there are privacy and safety challenges regarding govcoins.

Govcoins might be a possible threat only to crypto values that offer merely payment solutions or they might negatively impact the stablecoin industry. However, as there is a great number of different cryptocurrencies in the market, it is highly unlikely for govcoins to threaten the entire industry. 

Whats Should Crypto Traders Do

Visa always tried to make a place in the world of cryptocurrencies, from establishing partnerships with crypto exchanges to provide Visa debit cards that give crypto rewards, to offering a crypto-only payment. This latest project with Universal Payment Channel reinforces the idea that Visa wants to be part of the crypto industry, be it by working with govcoins or the other cryptocurrencies.

Govcoins seem to soon enough be the norm, and leaving payment only coins like LTC and Bitcoin Cash behind, as seen by the research. Something else that is expected is for Visa to move towards interoperability coins.

While most crypto investors only focus on competition from other crypto values, they should keep in mind that businesses use blockchain technology as well.

 Also read: Visa Working on Interoperability Concept for Central Bank Crypto Payments