On September 30th, Visa, one of the best credit cards worldwide, ventured into the Virtual currencies industry. Its product lead Catherine Gu announced that research undertaken by the company proved beneficial. Additionally, its product teams are working on an initiative Universal Payment Channel (UPC), for blockchains.
Visa for Cryptocurrencies
The main aim of the UPC interoperability is to connect different DLT networks. The cross-chain hub facilitates the transfer of digital assets using the Visa system. As explained by Gu, she likened it to a universal adaptor for different kinds of currencies. It joins central banks, businesses, and customers to stablecoins, fiat currencies and CBDCs for seamless transactions.
Moreover, Visa indicates confidence that the future of modern finance is in digital currencies. A promising outlook ensures that more CBDCs will come into play despite the United States delay.
UPC design ensures proper connectivity for all stablecoins and CBDCs to one cross-chain platform. In addition, the UPC hub would connect blockchain payment channels, different CBDCs worldwide and vetted stablecoin networks.
To add to that, Gu insisted that the payment structure would offer a speed advantage to slower public blockchains. She, however, did not mention the public blockchains Visa considers dead.
Developers aimed to make UPC a layer two protocol to operate outside the leading chains. The Visa UPC solution serves as a network specifically designed for blockchain networks. Following the announcement made, there was no clear stand for Bitcoin and altcoins.
Impacts on the Cryptocurrency Ecosystem
In the last two years, Visa has had an excellent relationship with cryptocurrency. It forged a relationship by betting big on crypto and investing in NFTs (CryptoPunk) on ethereum. Its recent ideas do not come as a surprise to most cryptocurrency investors.
The UPC structure creates a cryptocurrency payment channel equivalent to traditional international payment schemes. A real-world application would have an investor buy anything globally and have money deducted from their accounts in their home countries.
However, the process relies on systems that run banks, credit cards, fiat currencies and not blockchains. For proper functionalities, UPC hub intends to employ smart contracts known as “hashed timelock contracts”.
Additionally, for the developed project to work, Visa would have to convince national governments and companies to build digital assets aligned with the proposed UPC system.
The project developed in Silicon Valley is timely, just as CBDCs and stablecoins are gaining momentum.
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