Visa, Cross Border Payments, and Stablecoins

Still skeptical of digital currencies? That’s understandable, as crypto has yet to prove itself on a mass scale. But indications keep emerging—and have been coming at us at an accelerating pace of late—that the roadblocks to mass usage may not stand much longer.

Granted, nobody’s talking about Bitcoin replacing dollars. And not even stablecoins, the crypto that operates like fiat money, are threatening to achieve mass usage. And yet, and yet, indications keep emerging that mainstream acceptance could be nigh.

Here’s one example of what we’re seeing. Visa announced recently it will launch a cross-border payments service that will rely on stablecoins to fund transfers. The service, meant ultimately as an improvement on existing transfers that require users to commit capital in advance, will run on the Visa Direct real-time payments rails. The service is expected to transition to “limited availability” by April, Visa says, though timing for the pilot itself was not announced.

This is the first time Visa has ventured into stablecoins for cross-border transactions, the company says. The new service will allow businesses to “prefund Visa Direct with stablecoins,” Visa says, though recipients can elect to receive funds in their local currency.

The  service also takes advantage of the immediacy of blockchain technology. “Cross-border rails were built decades ago and stablecoins can provide the necessary upgrade to make payments faster, cheaper, and programmable,” the network says in a release regarding the development. A spokesperson did not respond to our queries.

The market potential could be substantial here. Cross-border payments amounted to $190 trillion in 2023, the most recent year for which figures are available, with business-to-business flows unsurprisingly accounting for the bulk of the volume. That potential has begun to attract payments players. MoneyGram International Inc., for one, recently unveiled a mobile app featuring a U.S. dollar-backed stored-value account that will work with stablecoins as well as fiat currencies for cross-border transactions.

The target market for the new Visa service embraces banks, remitters, and businesses, according to Visa. These parties are seeking the “faster, more efficient liquidity management” offered by stablecoins, along with instant-transfer capability,” the card company says.

Now, why stablecoins? They are blockchain-generated digital tokens whose value corresponds to the value of a fiat currency, such as the U.S. dollar. In this way, they avoid the significant swings in value seen with other digital currencies.

And along with that stability comes legislation, the GENIUS Act, signed into law this summer with rules and clarifications that are expected to serve as a roadmap for players looking to exploit stablecoins for various business purposes.

Still skeptical? We’re just a little less so these days.

—John Stewart, Editor john@digitaltransactions.net