Visa to test digital currency services

Visa Inc has joined rival Mastercard Inc in providing a way for central banks to test retail apps for digital currencies they might issue.

The card payment provider would begin piloting a program this spring with ConsenSys Inc, a blockchain software company, after discussions with around 30 central banks on goals related to government-backed digital currencies, Visa said.

Governments around the world have explored the release of central bank digital currencies (CBDCs) amid fears that rapidly growing cryptocurrencies could destabilize financial markets or replace fiat currencies.

Photo: Reuters

“We believe that stablecoins and CBDCs will coexist in the future, and there will be a number of different approaches to creating products based on that,” said Cuy Sheffield, head of cryptocurrency at Visa.

Payment service providers are likely to view government-backed digital assets as a safe and secure way to use blockchain, which aims to be faster and more efficient than traditional electronic transactions.

Mastercard launched a similar CBDC testing platform in 2020.

Additionally, Visa offers payment cards linked to USD Coin, a stable coin issued by a consortium including Circle Internet Financial Inc.

Nigeria and the Bahamas are among the countries already circulating CBDCs, and China is piloting a digital yuan in several cities before planning to expand its use at the Beijing Winter Olympics.

ConsenSys, led by Ethereum co-founder Joseph Lubin, worked with several central banks to test CBDCs, including the Hong Kong Monetary Authority, the Reserve Bank of Australia, and the Bank of Thailand.

The US Federal Reserve is expected to release a report valuing a government-backed virtual currency in the coming weeks.

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Sylvia B. Polson