Visa chooses Ethereum and USDC stablecoins to settle transactions
More mainstream adoption of stablecoins and Ethereum in traditional finance
The story
Big news for Visa and Ethereum
What happened?
Visa made a significant announcement today. The international payment behemoth announced they will begin settling transactions with USDC, a stable cryptocurrency pegged to the USD. Visa chose the Ethereum blockchain because of it’s decentralization, credible neutrality, and because it’s the most widely used chain with the strongest network effects. Visa is taking a calculated risk and betting on Ethereum’s ability to scale using layer two scaling technologies.
This is indeed a paradigm shift because it allows cryptocurrency companies (and eventually individuals) to settle transactions with USDC (a cryptocurrency). Visa itself is a ‘bank,’ but is not restricting payments to USD, which is a pro-crypto stance. If you can’t beat em, join em! The first application will be with crypto.com (CRO) credit cards, which utilize the Visa network to settle transactions. Crypto.com allows users to pay their credit card statements in crypto, but all funds eventually needed to be converted back to USD for settlement purposes before.
This puts crypto exchanges, like Coinbase, in a very good position, as well. Most Coinbase users have only purchased and held non-stable cryptocurrencies, but now have a really good reason to use Coinbase as their primary bank because they pay interest on on USDC holdings (5% APY). Show me a bank that comes close to 5% on USD these days!
Coinbase will start attracting individuals and businesses to keep cash reserves in USDC, which will require other banks to compete by adopting cryptocurrencies. The flywheel continues…
What’s next?
USDC is a centralized stablecoin, backed by USD, and run by Circle. USDC is the largest of the stablecoins, which all have accelerating growth curves. Eventually, I assume we’ll see another credit card or personal loan/finance company accept a decentralized stablecoin, like DAI, which is backed by various cryptocurrencies.
Regardless, today’s news further cements the utility and necessity of the Ethereum blockchain for an incredibly important component of commerce; international transaction settlement. The world is Ethereum’s oyster, and we’re still early!