Digital Currency: Visa's Vision For Supporting The Future Of Money
Digital Currency:Visa’s Vision for Supportingthe Future of Money
Table of ContentsIntroduction03The digital currency landscape04What is digital currency?05Types of digital currencies06Visa’s key areas of focus for digital currencies07Credentials everywhere07Crypto value-added services09Facilitating new digital currency fows09CBDC research and stakeholder engagement10Summary11Appendix12Digital Currency: Visa’s Vision for Supporting the Future of MoneyVisa Public2
IntroductionWhat if money became fully electronic?Sixty years ago, this simple yet bold question led to thefounding of Visa. Today, billions of people across the worldare familiar with the Visa brand—we tap to pay for meals,purchase groceries with a click, and send money seamlesslyand securely across borders and time zones.There have never been more ways to pay and be paiddigitally; yet, 18 trillion USD in cash and checks stillchanges hands annually.1Now, with the rise of digital currency—or‘digital versions of cash’—Visa has newtechnologies to harness in delivering ourmission: enabling individuals, businessesand economies to thrive by helping to movemoney more securely and seamlessly.Digital Currency: Visa’s Vision for Supporting the Future of MoneyBy examining digital currency, we aim to better understandthe impact it can have on the broader payments ecosystem.While the concept of digital currency was introduced morethan a decade ago, recent developments have acceleratedits adoption, such as the emergence of fat-backed digitalcurrencies known as ‘stablecoins’; a growing communityof developers building applications on top of blockchainbased networks; and rising interest among central banks tointroduce sovereign digital currencies.Given the potential of digital currencies to extend the valueof digital payments to a greater number of people and places,we want to help shape and support the role it plays in thefuture of money.In this paper we share Visa’s outlook on the digital currencylandscape and our approach for making digital currenciesmore safe, useful, and applicable for payments.Visa Public3
The digital currency landscapeThe history of digital currency began in 1983, when David Chaum introducedthe concept of a digital version of cash controlled by a private key.2 SatoshiNakamoto’s infamous Bitcoin paper was published 25 years later, settingthe stage for bitcoin transactions. In the intervening years, innovation andevolution in the space have given rise to a fourishing crypto ecosystem, withnew currencies, form factors, and applications emerging rapidly.Take fat-backed digital currencies, commonly referredto as stablecoins. Stablecoins combine the benefts ofdigital currencies with the stability of existing currencieslike the US dollar, and have the potential to unlock a hostof meaningful use cases for consumers, merchants, andfnancial institutions.Though the use of cryptocurrencies for everyday spendremains low, the mounting interest among consumers,developers, clients, and regulators is undeniable:Consumer interest: There’s a behavioral change happening,most prominently in Gen Z and Millennials. A recent surveyfound that 55% of 18-34 year-olds in the US intend to buybitcoin in the next 5 years (vs. 32% in 2017).3 Much of theappeal is cultural—with highly-engaged communities onplatforms like Twitter, TikTok, and Reddit cohering around ashared mantra and vernacular.Developer ecosystem: The crypto developer ecosystemis burgeoning with continued growth in the number ofdevelopers building new applications to deliver value to endusers. Ethereum, one of the largest crypto networks, has seen215% growth in active developers in the past 3 years.4Financial institution/fntech interest: Fintech andestablished fnancial institutions are taking notice. Someof the largest and most reputable fnancial institutions areactively exploring digital currency use cases—for example,JP Morgan’s JPM Coin. Additionally, with the proliferation ofcrypto-native fntechs, more and more non-crypto-nativefntechs are building out and launching new crypto features/products—for example, leading fntech companies likeSquare, SoFi, Revolut, Robinhood, and PayPal are all providingaccess to cryptocurrencies.Central bank interest: Central banks around the worldare increasingly interested in central bank digital currenciesDigital Currency: Visa’s Vision for Supporting the Future of Money(CBDCs). 86% of central banks are now exploring the beneftsand drawbacks of CBDCs. 60% of central banks are reportedlyconducting pilots or proofs of concept.5Growing interest and adoption among consumers,businesses, and governments have dominated headlines forthe last few years, and this trend shows no sign of slowing.Whether it’s fuctuations in bitcoin, a viral meme storming theinternet, or the trading of multimillion-dollar crypto-assets, itis difcult to deny the indelible impact that digital currenciesare having on the ‘culture of money.’Visa Public4
What is digital currency?Digital currency is a digital version of cash.There are three types of digital currency:CryptocurrencyCentral BankDigital Currency1980s; 2008 (Bitcoin)Late 2010sAttempt at creating a currencythat did not rely on central banksNew form of money issued bya central bank directly to its citizens,exists exclusively in digital formHigh volatility, limited acceptance,and interoperabilityBasically cash but in a digitalform, able to be received andspent directlyGenerally not used as a formof ocurrencyStablecoinStablecoinCBDCMid 2010sExamples:eCNY(China)e-Krona(Sweden)Two types of CBDCsRetail CBDC: for transactionsbetween consumers and businessesWholesale CBDC: interbanktransfers and settlementsDeveloped to mitigate thevolatility and limited use ofcrypto for paymentsIssued by private entities andcan be backed by assets, i.e.pegged to fat currencies orgold, or non-collateralizedExamples:USDCDiemMoneyDigital Currency: Visa’s Vision for Supporting the Future of MoneyVisa Public5
What you need to know aboutthe types of digital currenciesThere are three types of digital currencies: cryptocurrency,stablecoins, and central bank digital currency (CBDC).The most well-knowncryptocurrency is bitcoinBitcoin‘s decentralized blockchain network went live in2009 after the publication of a white paper in 2008 by anunknown person or group calling itself Satoshi Nakamoto.Visa views this segment of digital currency as a commodityor ‘digital gold.’ Cryptocurrencies are typically not used as aform of payment at this time due to a number of reasons,such as their high volatility, low transaction throughput,and limited acceptance.CBDC is gaining momentumRecently CBDC has gained signifcant interest amonga growing number of central banks, with three in fveconducting pilots or proof of concepts6—spurred in partby growing interest in cryptocurrencies as prices appreciateand the development of stablecoins such as USDC.Several countries and regions have CBDC research projectsunderway (e.g., Riksbank Sweden).Stablecoins are fat-backedStablecoins have the potential to be used as payments inglobal commerce, much like fat currency.The development of digital currenciesbegan decades agoWhereas cryptocurrencies are decentralized and volatile,stablecoins are designed to ofer stability. The limitedvolatility increases the possibility of digital currenciesbeing used for payment. And unlike fat currencies,stablecoins can transcend borders with transactions thatcan be near instant.Ecash was created by David Chaum in 1983 as ananonymous cryptographic electronic money signedby banks.Digital Currency: Visa’s Vision for Supporting the Future of MoneySubsequently, there were other attempts at creatingother decentralized virtual currencies, such as BitGold and b-money in the 1990s.Visa Public6
Visa’s key areas of focus fordigital currenciesWe see our work in digital currency as an extension of our corporate strategyaround consumer payments, value-added services, and new fows. Our rolein digital currency is focused on enhancing all forms of money movement—whether on the Visa network or beyond. Additionally, we’ve spent the pastfew years studying cryptocurrency, stablecoins, and public networks, buildingrelationships in this space, and exploring how to add value.Our focus spans four areas:Credentials everywhere(consumer payments)Crypto value-added servicesFacilitating new digital currencyfows (new fows)Credentials everywhereMost consumers participating in the cryptoeconomy are managing their funds through acrypto exchange—via a web-based platform ormobile app. We are working with 50 of the leadingdigital currency platforms to enable connectingtheir customers’ accounts to Visa credentials, withthe goal of making it simple and convenient toconvert and spend crypto at any of the 70 millionmerchants worldwide that accept Visa.CBDC research andstakeholder engagementCoinbaseVisa DebitCardBitpanda VisaDebit CardFold VisaDebit CardBlockFi VisaDebit CardDigital currency settlementTo position Visa as the partner of choice with today’s digitalcurrency platforms, we have made infrastructure investmentsdesigned specifcally for crypto-native companies, suchas enabling settlement in USD Coin (USDC), a regulatedstablecoin backed by the US dollar and transacted over theEthereum blockchain.Digital Currency: Visa’s Vision for Supporting the Future of MoneyVisa Public7
Billions of dollars are cleared and settled each day withVisa’s settlement service—securely, reliably, and predictably.While it operates behind the scenes, Visa’s settlementsystem has served the traditional fnancial sector—andeveryday consumers and business owners—for decades.But what about fntechs and neo-banks that run theirbusiness in digital currencies like bitcoin, ether, or USDC?Take Crypto.com, the largest provider of crypto paymentand trading services. Visa’s standard settlement processfor purchases made on Crypto.com Visa cards each dayrequires Crypto.com to convert their digital currencies intoa traditional fat currency that Visa accepts—adding cost,time, and complexity to their daily business processes.To make it easier for crypto-native companies likeCrypto.com to work with Visa and manage their businessend-to-end in digital currency, we invested in a series oftreasury infrastructure upgrades that enable us to: Support reconciliation and currency conversion forstablecoins such as USDC Integrate Visa’s treasury systems with Anchorage,Visa’s digital asset settlement agent Support a new Visa settlement report that includessettlement obligations along with public blockchainaddresses for account management of crypto walletsand issuersUSDC was selected based on our due diligence eforts,which included an examination of client demand, stability,and security. USDC measured up against all these criteria,with a robust developer community, growing adoptionacross clients, and a track record showing clear complianceand regulatory engagement.Figure 1: Digital Currency Settlement7IssuerBlockchainIssuer settles digitalcurrency with Visa bypushing funds to Visa’sdigital addressMoneyDigital Currency: Visa’s Vision for Supporting the Future of MoneyDigital AssetSettlement AgentReceives settlement fromissuer over the blockchainVisa PublicBlockchain orReal-Time GrossSettlement (RTGS)AcquirerReceives settlementin either digital currencyor fat currency8
Crypto value-addedservicesfraud. Advanced Identity Score can be used to manageidentity fraud at the point of customer credit application, andCybersource Decision Manager can be utilized to managefraud associated with the buying/selling of crypto assets withcredit cards on clients’ platforms.Visa Crypto APIsFor banks or fintechs who are lacking a digital currencyoffering and are looking to develop one, they can utilizeVisa Crypto APIs. Doing so helps them deliver newinnovative offerings to their existing customer basewithout the need to use a separate crypto exchange.New digitalcurrency flowsWe are evolving Visa to be a network of networks—in orderto enable the movement of money across a variety ofpayment flows on VisaNet and beyond. With this strategyin mind, we‘re focused on helping clients who want toparticipate in using new digital currency flows.Digital currency innovation hubWe have launched a global innovation hub wherelike-minded partners can jointly develop solutionsand user experiences in the realm of digital currencyand crypto. At our hub, partners can gain access toindustry insights and work closely with our Product, VisaConsulting & Analytics, and Innovation Center subjectmatter experts to:For example, our vision is to help make it possible for globalmarketplace clients to quickly identify Visa Crypto PartnerWallets that are equipped to safely receive USDC payouts—giving those marketplaces confidence to pay their sellers inanother country. Once a seller in another country receivesthose funds, they can use the Visa credentials in their digitalcurrency wallet to convert and spend their income at anyVisa-accepting merchant. Discover: uncover trends in digital currencyand explore growth opportunities Collaborate: research, design and test solutionconcepts for new digital currency technologiesusing human-centered designThese new digital currency payment flows can be particularlyuseful in instances where payers and payees are distributedglobally, and in regions where payments in a US-backedcurrency are desirable. Additionally, they can complementthe other ways Visa enables payment flows by enablingpayouts over public blockchain networks that are receivedby digital currency wallets. Build: develop and pilot proof of conceptswith payment engineering expertsOther crypto value-added servicesAdditionally, crypto native clients can leverage Visa’sbroader set of value-added services to help manageFigure 2: New Digital Currency Flow Payouts Use Case8Seller in NigeriaVisa CryptoPartner WalletsUSDCUS ConsumerMerchant in NigeriaGlobal CommercePlatformSeller in ArgentinaDigital Currency: Visa’s Vision for Supporting the Future of MoneyVisa PublicMerchant in Argentina9
CBDC researchand stakeholderengagementAs the world leader in digital payments, we recognizewe have a responsibility to lead and contribute todiscussions shaping the digital currency space. Ourresearch and development team has been exploring thescience of blockchain technology for several years andtheir work has yielded several promising innovations.Ofine capabilityWe published a technical paper that outlines aninnovative approach for making secure point-to-pointdigital currency transactions using authorized hardware,when neither the buyer nor the seller has a connectionto the internet. The protocol allows digital money to bedirectly downloaded onto a personal device, such as asmartphone or tablet. The money is stored on securehardware embedded in that device and managed bya wallet provider (e.g. a bank). In the future, central bankdigital currencies could be transacted from one device toanother device directly without any intermediaries. Thus,the ofine payment system creates an experience similar tophysical cash. But, instead of paper money in your physicalwallet, it’s bits and bytes in your phone.PrivacyWith the future of payments becoming more digital andwith digital tokens as bits of information, industry standardsare needed to protect data privacy and to develop consumerprotection. Visa has been driving cutting-edge researchin privacy preserving cryptography, including the Zetherprotocol, and we’ll continue to strive for higher consumerprotection standards in the new age of digital currencies.Visa’s research is focused on developingcutting-edge standards for digital currencyScalabilityInteroperabilityBuild resilient digital currencypayment technologies that can bescaled across the worldDevelop global interoperable standardsto facilitate payment between variousdigital currency networksOfine CapabilityAuditabilityExploring ofinecapability forpayment systemsDevelop standardsfor fraud detectionand managementVisa ResearchSecurityDigital currency areas of focusDevelop cuttingedge cryptographyto enhancepayment securityDigital Currency: Visa’s Vision for Supporting the Future of MoneyMoneyPrivacyDevelop consumerprotection and dataprivacy standardsVisa Public10
Key stakeholder engagementFor any technology to gain widespread adoption,multiple key stakeholders need to come togetherto make it work for people in a variety of locales andcontexts. CBDC is no diferent. The challenges thatcentral banks face in launching CBDC are vast andcomplex. Implementing new technologies is an iterativeprocess, requiring input from diverse stakeholders, andwe want to contribute our expertise and thinking ascrucial design decisions are being shaped.At Visa, we’ve been driving cutting-edge research andproduct capabilities, partnering with leading digitalcurrency providers, and engaging with policy makersand central banks around the world as their thoughtpartner to help shape the ongoing dialogue andunderstanding surrounding digital currencies and CBDC.We look forward to working with central banks at thisimportant moment in time to create secure, convenient,and reliable CBDC that can seamlessly integrate with theexisting payments ecosystem.SummaryAt Visa, we are focused on being the best way to payand be paid, regardless of the channel or mode ofpurchase. To do that, we want to be able to supporttransactions when and where they occur, across anexpanding range of channels. We are ready to supportdigital currency when it becomes recognized as ameans of exchange, similar to the other 160 currencieswe already support on our network today.For more information, contactyour Account Executive or visitwww.visa.com/cryptoDigital Currency: Visa’s Vision for Supporting the Future of Money11
Appendix1 Visa analysis of data from Oxford Economics, Nilson Report, Euromonitor,Haver Analytics, UK Card Association, Central Bank of the RussianFederation.2 Bitcoin and Cryptocurrency Technologies, Arvind Narayanan, JosephBonneau, Edward Felten, Andrew Miller, Steven Goldfeder3 Blockchain Capital - Bitcoin is (Still) a Demographic Mega-trend: DataUpdate – December 20204 Electric Capital – Developer Report, January – October 20205 Bank of International Settlements Central Bank Survey on CBDC’s.6 Ibid.7 This fgure shows how Visas’ digital currency settlement process works.Issuers can settle digital currency with Visa by pushing funds to Visas’digital address through the blockchain. Visas’ digital asset settlementagency receives these funds from the issuer. Afterwards, the acquirer canreceive settlement in either digital currency (via the blockchain) or in fatcurrency (via real-time gross settlement or RTGS).8 This fgure shows how digital currency fows can work in a marketplacepayouts use case. In this scenario – a consumer purchases goods froma global commerce platform utilizing their Visa card – like a typicaleCommerce transaction. Afterwards, this global commerce platform sendsUSDC payouts to their sellers. The sellers receive USDC in their Visa CryptoPartner Wallets which have Visa credentials associated with them. One ofthese sellers is in Nigeria and the other is in Argentina – and because theirVisa Crypto Partner wallets have Visa credentials associated with them,they are now freely ability to utilize these funds at any merchant thataccepts Visa in their country.Case studies, statistics, research and recommendations are provided "AS IS" and intended for informational purposes only and should not be relied upon foroperational, marketing, legal, technical, tax, fnancial or other advice. You should consult with your legal counsel to determine what laws and regulations mayapply to your circumstances. The actual costs, savings and benefts of any recommendations or programs may vary based upon your specifc business needsand program requirements. By their nature, recommendations are not guarantees of future performance or results and are subject to risks, uncertaintiesand assumptions that are difcult to predict or quantify. Visa is not responsible for your use of the information contained herein (including errors, omissions,inaccuracy or non-timeliness of any kind) or any assumptions or conclusions you might draw from its use. Visa makes no warranty, express or implied, andexplicitly disclaims the warranties of merchantability and ftness for a particular purpose, any warranty of non-infringement of any third party's intellectualproperty rights. To the extent permitted by applicable law, Visa shall not be liable to a client or any third party for any damages under any theory of law,including, without limitation, any special, consequential, incidental or punitive damages, nor any damages for loss of business profts, business interruption,loss of business information, or other monetary loss, even if advised of the possibility of such damages. 2021 Visa. All rights reserved.Digital Currency: Visa’s Vision for Supporting the Future of MoneyMoneyVisa Public12
Digital Currency: Visa's Vision for Supporting the Future of Money Visa Public Consumer interest: The digital currency landscape The history of digital currency began in 1983, when David Chaum introduced the concept of a digital version of cash controlled by a private key. 2 Satoshi
Transaction currency The currency in which a transaction originates. Accounting currency The primary currency in which a legal entity maintains its financial records. The accounting currency is stored in the Ledger table. Reporting currency The reporting currency of the ledger. The reporting currency is stored in the Ledger table. It is optional.
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the currency of the bond's denomination as the local currency and the chosen currency of the portfolio or index as the base currency. The return of this security in the base currency on day t can be computed using the following inputs. and 1 are the market values in local currency at the close of day t and t-1 respectively.
Currency Harvest was 15.22%. The Global currency harvest returned 12.07% and the G10 Currency harvest returned 8.02%. The Sharpe ratios for the Balanced Currency Harvest, Global Currency Harvest and G10 Currency Harvest over the period were 1.60, 1.23 and 1.07 respectively. (The returns are in USD terms
health care for poor persons under the Constitution, or that wealth distinctions create a “suspect class,” the Court would likely evaluate governmental actions involving health care using the less rigorous “rational basis” standard of review. Most health care legislation would likely be upheld, as it has been, so long as the government can show that the legislation bears a rational .
