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Visa has introduced a new platform aimed at assisting financial institutions in the issuance of fiat-backed tokens, positioning itself as a leader in the integration of blockchain technology within the banking sector.
Led by Cuy Sheffield, Visa’s cryptocurrency division is guiding banks in the adoption of this innovative infrastructure. The company recognizes that banks can enhance their financial systems by utilizing fiat-backed tokens and participating in on-chain capital markets.
Visa’s platform is designed to facilitate the shift from conventional financial infrastructure to blockchain-enabled digital systems.
Visa in Web3: The New Blockchain Fiat-Back Tokens
Visa has been monitoring the progress of tokenization closely, especially as central banks and commercial financial entities strive to modernize their payment and settlement frameworks.
Sheffield stated that Visa’s new Tokenized Asset Platform (VTAP) will enable banks to investigate these technologies within a regulated setting.
Banco Bilbao Vizcaya Argentaria (BBVA) in Spain, one of the banks involved, is already conducting tests and plans to initiate a pilot on the Ethereum blockchain in 2025.
In Hong Kong, Visa is similarly examining the application of tokenized deposits for the cross-border settlement of tokenized securities.
Excited for Visa to partner with @ANZ_AU for Phase 2 of the Hong Kong Monetary Authority e-HKD pilot to explore the use of tokenized deposits for cross border settlement of tokenized securities https://t.co/tsaMMDbnOh
— Cuy Sheffield (@cuysheffield) September 24, 2024
While fintech firms like PayPal have led the way in stablecoin innovation, Visa’s initiative indicates that major financial institutions are now prepared to experiment with blockchain technologies.
Visa seeks to assist these institutions in navigating the complexities of regulatory compliance while unlocking new opportunities for liquidity and real-time money movement.
Visa executives have pinpointed real-time money transfers and cross-border payments as primary applications for fiat-backed tokens.
Banks could utilize these tokens to facilitate seamless money transfers between clients, akin to JPMorgan’s JPM Coin System, which operates as a permissioned payment rail.
Real-World Applications for Banks
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In areas where central banks are developing wholesale CBDCs, banks could also employ fiat-backed tokens to streamline inter-bank transfers, thereby improving the efficiency of financial transactions.
Catherine Gu, Visa’s head of CBDC and tokenized assets, noted that cross-border transfers are a significant focus area. She remarked;
“For especially multinational corporates moving money 24/7, right now the rails are very limited for them to do so,”
Blockchain presents a solution by enabling quicker, more efficient transactions, which is why major banks are eager to investigate this application.
Banks could now offer clients a more efficient, round-the-clock money movement solution.
Engaging with tokenized real-world assets is another domain that Visa anticipates will generate substantial demand for fiat-backed tokens.
Banks could allow customers to utilize these tokens for purchasing tokenized commodities or government securities, with blockchain technology facilitating instant settlement.
Sheffield also emphasized the potential for banks to leverage smart contracts to develop structured financial products, such as automated lending against tokenized commodities through smart contracts.
Despite the potential, Visa recognizes that challenges persist, particularly concerning the fragmentation of tokenization platforms.
Various financial institutions may opt to operate on different public and private blockchains, depending on their specific use cases and regulatory frameworks.
This lack of standardization presents a considerable obstacle to widespread adoption, as it complicates interactions among institutions.
Visa is actively working to tackle these challenges by advocating for global standards in blockchain-based financial services, ensuring that financial institutions can function effectively across diverse blockchain networks.
Importantly, Visa has been a pioneer in the industry’s innovative adoption within Banking.
Earlier this year, Visa collaborated with Transak, a Web3 infrastructure provider, to promote cryptocurrency adoption by allowing users to convert crypto to fiat currencies directly via Visa debit cards.
This integration utilizes Visa Direct, which facilitates real-time withdrawals from wallets like MetaMask and enables users to spend crypto balances at over 130 million merchant locations.
The post Visa Creates Platform to Aid Banks in Issuing Fiat-Backed Tokens appeared first on Cryptonews.
