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Visa Transacting on Ethereum Signals Stronger TradFi-Crypto Link

Visa is now settling transactions via stablecoins on the Ethereum network.

While these are just a tiny sliver of Visa’s total volume, and only apply to one client, the fact that the largest payments network is using a public blockchain signals the integration between traditional finance and crypto is strengthening.

The first such transaction in USDC, a USD-backed stablecoin, was settled over Ethereum, Visa said in a March 29 blog post

Partnering with Crypto.com

Visa had already established a partnership with Crypto.com, one of the major centralized crypto exchange apps, to offer users a Crypto.com Visa card. However, prior to this development, Crypto.com still needed to settle transactions (ie: pay Visa back) with traditional fiat currency according to Visa’s standard settlement process for partners. 

This meant that if a Crypto.com Visa cardholder made a card transaction in USDC, Crypto.com would then need to go through the process of converting their USDC tokens into fiat currency before they could settle up with Visa. 

Now, Crypto.com can simply send USDC straight to Visa’s Ethereum wallet, no fiat-conversion necessary. This will result in fewer unnecessary conversion fees for fintech companies dealing in crypto that want to partner with major payment networks like Visa. 

There is currently about $10B in stablecoin volume settling on Ethereum daily, according to DeBank, the most out of any blockchain network, including Bitcoin.

Anchorage Bank

Visa’s newest jump into the crypto world follows on the heels of a partnership with Anchorage Digital Bank, which brands itself as the “first federally chartered digital asset bank.” 

This partnership allows Visa to maintain an Ethereum wallet address through Anchorage. 

For newer fintech companies focused on digital currencies, this makes partnering with Visa much more cost-effective.

Only the First Step

While Visa is testing the waters with USDC, which was co-founded by Circle and Coinbase, due to its stability and liquidity as a digital asset backed by the traditional US dollar, it plans to expand much further into digital currency. 

“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,” Visa wrote on their blog. 

CBDC refers to blockchain-based digital currencies issued by centralized authorities as a supplement for traditional fiat. While these currencies aren’t necessarily part of DeFi, they do encourage wide-scale blockchain adoption and increased accessibility and internationality for transactions.

Moreover, Visa’s decision to use an Ethereum-based stablecoin as their test crypto of choice is a great sign for continued mainstream adoption of the Ethereum blockchain. 

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