Bitcoin was invented to disrupt existing monetary systems that many felt were too expensive and exclusionary. With this in mind, it was given a much broader value proposition than a deflationary issuance policy and hard cap of 21 million units. Through the novel use of blockchain technology, it also allows anyone to send money to a counterpart around the world in a few minutes for fractions of a dollar.
This functionality placed incumbent payment platforms such as card networks and interbank messaging systems directly in bitcoin’s crosshairs. While some firms dismissed these concerns, others saw the potential and looked for ways to derive value for their partners and shareholders.
To investigate this issue further, Forbes recently spoke with the two Visa executives most responsible for its crypto and blockchain strategy Terry Angelos, SVP global head of fintech at Visa and Cuy Sheffield, senior director, head of crypto at Visa. The pair shed substantial light on how Visa approaches innovation and evaluates opportunities to incorporate promising technologies, such as crypto and blockchain, into its operations.
They also went into significant detail on how they are approaching next generation digital assets, such as stablecoins and forthcoming assets that will be issued directly by central banks. It was a fascinating discussion that leaves one thing clear, digital assets and blockchain technology are going to be important parts of Visa’s future.
Forbes: Visa recently published an article on its blog titled,Advancing our approach to digital currency, which consolidated a lot of your recent activities into one concise document. What was the impetus behind its creation and why was now the right time to release it?
Cuy: We’ve been advancing our work on digital currency, both on the product and research side, for the last two years. However, while the strategy has continued to evolve, we haven’t talked about it very much. In this vacuum, we’ve seen different narratives and speculation about our activities, so the post was primarily to articulate why Visa is investing in and spending time on digital currencies. We also wanted to lay out some of the principles that are guiding our strategy.
Forbes: Thank you for that background. Can you get a little more specific and talk about how your work in blockchain and crypto fits into this thinking?
Terry: One of Visa’s significant developments over the last few years was its evolution to becoming a “network of networks.” This means initiating and terminating transactions across multiple networks, some of which we own and others that we don’t, such as SWIFT or local ACH networks.
In that context, although we don’t do this today, we would think of interoperating with a blockchain network that we don’t control as being no different than a third-party real-time payments platform.
Forbes: How has this thinking guided your engagement with companies in the space so far?
Terry: Because we don’t think of blockchain networks as being different from a strategy perspective, to the degree that blockchain networks emerge, are legal and regulated, we can engage with them in the same way as any other network. To that end, Cuy is helping to build the product set that can interface with those networks. Consider our partnership with Coinbase (in February 2020 it became the first crypto company to become a direct Visa card issuer with principal membership). That’s an example of a Visa credential being linked to a Coinbase account, which has a store of value that happens to be in digital assets. Coinbase is ultimately doing the conversion into fiat (for the purposes of navigating our network), but you’re effectively connecting a digital asset to the Visa network.
Forbes: The Coinbase announcement made a big splash, but you’ve also partnered with other crypto payments firms such as Fold. Can you give us an idea of the number of potential partners in the pipeline? Additionally, do you onboard each of these clients in the same way or are there differences?
Terry: We are seeing significant interest in demand from crypto companies that want to work with Visa and connect their clients to our network of 60-plus million merchants. So far, we have onboarded about 25 companies from around the world that are at various stages of development. Given this diversity, our engagement with them can go down a few different paths. First, there are very large and established companies like Coinbase, which we simply treat as strategic fintech clients.
However, there is this vibrant ecosystem of crypto-native companies building directly on top of blockchains. In those cases, our Fast Track program has been a key success factor. It gives participating companies a single point of contact with the firm so that they can learn how to engage with Visa and its partners and be able to issue credentials. In fact, we have vetted partners to help them set up AML/KYC (anti-money laundering/know your customer) programs, find a bank sponsor or partner with an issuer processor, should those things be necessary.
While we are on this topic, I also want to point out that we make an internal distinction between the terms cryptocurrency and digital currency because that will help you better understand our client base. We think of cryptocurrencies as assets that are natively issued onto a blockchain, while we broadly define digital currencies as tokenized versions of fiat, such as what Coinbase and Circle are doing with USDC. Most of our crypto clients fall into the latter category.
Forbes: Is Coinbase still the only crypto company that is still a principal member of Visa?
Terry: Yes. But I think we have some that are potentially in the queue.
Forbes: Let’s switch gears and talk about Visa’s investments in the space. You’ve made an investment in the institutional crypto custody firm Anchorage. Are there others you can disclose?
Cuy: Anchorage is the only public investment that we’ve made directly in digital assets. We think the company is providing a fundamental security infrastructure that’s going to be critical for digital currencies to be able to be developed and be used.
Forbes: Building on that, what do you look for when it comes to a crypto portfolio company? What do you hope to get out of these engagements?
Terry: If you look at our investment strategy overall, we get very excited about payment infrastructure companies (see our 2015 investment in Stripe, the payment processor). This is something that we want to focus on in the crypto world. In fact, you can think of Anchorage as digital infrastructure. Custody is one of the most important and technologically difficult things to manage for any digital currency, and it is necessary for a healthy payment ecosystem.
We can even take this line of argument further. Consider central bank digital currencies (CBDCs). There are a few ways to issue them, but one of the models we see most is where traditional banks serve as primary access points for funds. In fact, that’s exactly what’s happening in China right now with the digital yuan. So, if you are a bank in a market with a CBDC, you will need to custody the legal digital version of that currency. We think companies like Anchorage will be one of the partners that those banks would have to turn to for that capability.
Forbes: Are there any exciting new projects coming out of the research team related to crypto?
Cuy: One area that we’ve spent time on as well is offline digital currency payments. When central banks think about CBDCs, one of the potential features that they are paying attention to is offline payments. There are a lot of technical challenges around enabling this functionality in a secure manner. So we are continuing to advance research on that front and we’ll hopefully have more to talk about in the coming year.
The whole interview here
„Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”