This spring, the financial services giant Visa plans to pilot a new platform for central bank digital currencies (CBDC), in partnership with blockchain software company ConsenSys Inc.
Visa's new platform will test government-backed digital currencies and Visa's own products. "We envision a user experience that looks very familiar to how you pay today," says Catherine Gu, Visa's Head of CBDC. "If CBDC networks are seamlessly integrated into your existing banking app, you’d be able to use your CBDC-linked Visa card at the checkout. Or tap your digital wallet .. to pay securely at any of the 80 million merchant locations worldwide that accept Visa."
Using an open-source Ethereum protocol, Visa’s CBDC Payments Module allows central banks to deploy a two-tier CBDC system that connects to traditional financial service providers. "For banks and issuers processors, they’ll be able to plug into the module and integrate their existing infrastructure and be enabled to do things like issue CBDC-linked payment cards or wallet credentials for consumers to use," Gu said.
In recent years, CBDCs have gained traction as governments around the world worry that they need to provide a viable alternative to cryptocurrencies, lest they risk allowing the future of money to bypass them.
The program was designed after consultation with approximately 30 central banks about how they want digital currencies to look.
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It builds on Visa's previous work with 60-plus crypto platforms seeking to link its services with digital currencies like the USD Coin.
Visa is following in the footsteps of Mastercard, which in 2020 also created a testing platform for central bank digital currencies. "We look forward to continuing these partnerships with governments and helping them explore the best ways to develop these new currencies," Mastercard said about trialing CBDCs.
"Mastercard isn’t here to recommend you start using cryptocurrencies," the company said. "But we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want. It should be your choice, it’s your money."
In September, Visa unveiled a plan for interoperability through a "universal adapter" linking merchants, blockchain systems and customers. The plan allows customers to conduct financial transactions across multiple networks in real-time.
The compatibility with different digital wallets is highly sought after as merchants and customers increasingly move toward blockchain-based transactions on different digital wallets.
“For CBDCs to be successful, they must have two essential ingredients: a great consumer experience and widespread merchant acceptance. It means the ability to make and receive payments, regardless of currency, channel, or form factor,” the company said.