Visa has launched a new platform to support financial institutions in issuing fiat-backed tokens, positioning the company at the forefront of integrating blockchain technology with the banking system.
The platform will enable the transition from traditional financial infrastructure to digital systems powered by blockchain. Guiding banks through this process is Visa’s crypto asset management team, led by Cuy Sheffield.
Visa on Web3
Visa has been closely monitoring the evolution of tokenization, particularly as central banks and commercial institutions seek to modernize their payment and settlement systems.
According to Cuy Sheffield, the Visa Tokenized Asset Platform (VTAP), as the platform is called, will allow banks to explore these technologies in a regulated environment.
One of the participating banks is Bilbao Vizcaya Argentaria (BBVA) in Spain, which is already testing the system. The plan is to launch a pilot on the Ethereum blockchain in 2025. Similarly, Visa is exploring the use of tokenized deposits for cross-border settlement of tokenized securities in Hong Kong. The project is being carried out in partnership with Australian bank ANZ.
While fintechs like PayPal have been at the forefront of stablecoin innovation, Visa’s move signals that major financial institutions are now ready to experiment with blockchain technology.
In this sense, Visa aims to help these companies navigate regulatory complexities and, at the same time, open up new opportunities for liquidity and real-time money movement.
Visa executives have identified real-time money transfers and cross-border payments as key functionalities of fiat-backed tokens.
Banks can leverage these tokens to move money between customers seamlessly, similar to JPMorgan’s JPM Coin System, which functions as a permissioned payment system.
Solutions for banks
In regions where central banks are developing CBDCs (central bank digital currencies), these fiat-backed tokens could also facilitate transfers between banks, thereby increasing the efficiency of financial transactions.
According to Catherine Gu, head of CBDC and tokenized assets at Visa, cross-border transfers are a big target for the project. She argues that, especially for multinational corporations that move money 24 hours a day, the systems are currently too limited.
Blockchain technology offers a great solution by enabling faster and more efficient transactions. This is exactly why big banks are keen to explore this new opportunity, says Catherine Gu.
Innovations and challenges
Visa also argues that interaction with real-world tokenized assets is another front that should generate significant demand for tokens linked to fiat currencies.
In this way, banks could allow their customers to use these tokens to purchase tokenized commodities or government bonds, with blockchain technology enabling instant settlement.
Sheffield also highlighted the potential for banks to use smart contracts to create structured financial products, such as loans against automatically tokenized commodities through smart contracts.
Despite all these opportunities, Visa acknowledges that there are still several challenges in this field, particularly with regard to the fragmentation of tokenization platforms.
Different financial institutions may choose to operate on various public and private blockchains depending on their objectives and regulatory environments.
As a result, this lack of uniformity represents a major obstacle to mass adoption, as it complicates interactions between institutions.
Visa is working to address these issues by promoting global standards for blockchain- based financial services . This would ensure that financial institutions can operate efficiently across multiple blockchain networks.
Another example of Visa’s innovative approach to banking is its partnership with Web3 infrastructure provider Transak. The goal is to improve cryptocurrency adoption by allowing users to convert cryptocurrencies into fiat currencies directly through Visa debit cards.
This process uses Visa Direct, which enables real-time withdrawals from digital wallets like MetaMask and allows users to spend crypto balances at over 130 million merchant locations.
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