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Visa’s New Payment System Will Accept Everything From Bitcoin to Dollars

Visa's New Payment System Will Accept Everything From Bitcoin to Dollars
Written by publishing team

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Visa proposes a solution to the problem of cryptocurrency interoperability.

When Bitcoin (BTC) was launched in 2009, it promised to operate as a digital payment broker with no middleman. Today there are more than 12,000 types of cryptocurrency, disrupting all kinds of industries, from supply chains to fast and cheap digital payments.

So where does that leave payment processors like Visa? Well, if Visa had anything to do with it, it would still be in the middle of it all.

Visa proposes a multi-chain payment system

This week, Visa released plans for a global payment channel, which it says “acts as a hub, connecting multiple blockchain networks and allowing for secure digital currency exchange.”

Visa’s research team believes that the channel, which is currently being worked on, could solve the interoperability challenges faced by many cryptocurrencies. Here’s what that means:

Currently, many blockchain ledgers operate in silos that are unable to transact with each other. For example, if you want to spend Bitcoin on an application built on the Ethereum (ETH) network, it will be difficult. Interoperability would solve this problem.

Without it, cryptocurrencies would not be able to reach their full potential. Imagine not being able to transfer money, for example, between bank accounts located in different banks. That’s why many organizations, including Visa, are looking for solutions.

Cryptocurrencies such as Polkadot (DOT), Avalanche (AVAX), Cosmos (ATOM), and Polygon (MATIC) are also operating in this space. They have different solutions and it is not clear if one (or several) will appear as the main interoperability provider.

Focus on govcoins

Another interesting aspect of Visa’s proposal is that it focuses as much on central bank digital currencies (CBDCs) as it does on cryptocurrencies. Central bank coins, also known as govcoins, are digital currencies backed by the government.

Many governments are considering using blockchain technology to launch their own virtual currencies. China has been experimenting with a digital yuan for some time, and the Federal Reserve is investigating the potential benefits of a digital dollar.

It is clear from Visa’s research that he envisions a future in which govcoins will play a major role. This is an important trend that cryptocurrency investors should pay attention to. Govcoins will offer the benefits of existing virtual currencies – cheap and fast transactions – but without the same risks of volatility or currency failure.

But govcoins bring different problems. One problem is that they de-decentralize which was a core component of the original Bitcoin proposal. Decentralization means that cryptocurrencies do not need support from a third party such as a bank or government. There are also additional privacy and security concerns.

Govcoins May Threaten Cryptocurrencies Just Offer payment solutions and may also impact the stablecoin industry. But given the number of different types of cryptocurrencies in the market, it is unlikely that govcoins will completely undermine the industry.

What does this mean for cryptocurrency investors

Visa has consistently made space for itself in the crypto world, from partnering with crypto exchanges to offer Visa debit cards that earn crypto rewards, to settling just the first crypto payment. The latest global payment channel shows that it wants to maintain its number one position, whether that includes working with govcoins or existing cryptocurrencies.

Her research suggests that it is only a matter of time before govcoins become the norm, which could limit the long-term prospects of pure payment currencies such as Litecoin (LTC) and Bitcoin Cash. If you are a fan of interoperability coins, it is good to remember that Visa is probably moving into this space. It is easy to just focus on the competition from other cryptocurrencies, but companies can use blockchain technology as well.

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