Visa Moves to Support Stablecoins for U.S. Settlement

Visa Inc. announced early Tuesday it is supporting stablecoins as a settlement option for issuer and acquirer banks in the United States, a major move in payment card finance and one observers see as an inevitable next step for the industry, though one that could come with complications.

The use of stablecoins will make settlement “potentially faster, more convenient, and cheaper,” notes Eric Grover, principal at the payments advisory Intrepid Ventures. Now, he adds, “here we have the biggest [payments] network in the world putting its imprimatur on stablecoin settlement. That’s a certification, an endorsement, if you will.”

The potential downside, though, could lie in how well the broader merchant, acquirer, and banking world understands stablecoins and how fast they will adopt them. “Outside the crypto world, I wonder what’s the scenario where the issuer and the acquirer would prefer to use stablecoins,” Grover says. “That’s the question right now.”

For its settlement venture, Visa is relying on USDC, a stablecoin issued by Circle Internet Group Inc. Cross River Bank and Lead Bank are two initial participating institutions, and have already begun settling with Visa on the Solana blockchain, according to Visa. More banks will be added throughout the year, the network says.

Banks may see further advantages from the pilot. “Today’s money movement is fragmented across fiat rails and blockchains. Moving stablecoins requires an intermediary, costly transfers, and disparate ledgers. This process can be improved upon—and that was our goal at Cross River,” notes a spokesperson for the bank.

Stablecoins retain a value pegged to a national fiat currency, often the U.S. dollar. The advantages these coins bring include speed and availability, with settlement transactions flowing seven days a week. The latest venture entails a “bridging,” Visa says, of two systems that have until recently operated in separate worlds, conventional payment networks and blockchain technology.

Visa and its rival, Mastercard, have for years launched pilots of various kinds for cryptocurrency, both in the U.S. and abroad. But the simplicity, speed, and very stability of blockchain-generated coins tied to the value of a national currency appeals to network operators, banks, and, ultimately, merchants, observers say. Now, Visa’s latest move means blockchain finance has moved from the margins to the center of payments, according to some observers. “It’s in the mainstream,” Grover notes.

Visa has been active in digital currency ventures and pilots for years. Indeed, it recently announced its stablecoin settlement volume has surpassed $3.5 billion in annualized volume, having settled its first stablecoin transaction in 2023.

Now, observers say, this latest venture, coupled with supportive federal legislation passed by Congress last summer, could move more banks to get involved in crypto settlement. “Big, conservative banks won’t be early settlement banks, but all of them have their toes in the water,” says Grover. “Stablecoins are fit for purpose. Now the question is, can they get traction in the U.S.?”