Cryptocurrencies pose both complementary opportunities and competitive threats for Visa, according to the company’s annual shareholder report.
The CEO of the world’s largest credit card company told shareholders on Tuesday that stablecoins and central bank digital currencies (CBDCs) will play a “significant role” in the payments space going forward.
The company also published its 2022 annual report, in which it wrote about its simultaneously complementary and competitive relationship with cryptocurrencies.
Visa Insights on Cryptocurrency
As CEO Alfred Kelly explained during a conference call, the company already has “multiple initiatives” underway in the blockchain space, and has already invested in many funds and cryptocurrency companies.
“It is very early days, but we continue to believe that stablecoins and central bank digital currencies have the potential to play a significant role in the payments space,” Kelly said.
Stablecoins combine the peer-to-peer nature of cryptocurrencies like Bitcoin with the relative price stability of another currency or asset, often the US dollar. This solves the problem of price instability that critics, including central banks say, prevents Bitcoin from being a legitimate currency.
Tether (USDT), which is the largest stablecoin by market capitalization, has a higher daily trading volume than any other cryptocurrency.
Meanwhile, CBDCs are government-issued currencies in digital form, built on blockchain rails. Federal Reserve Vice Chair Lael Brainard has shown her support for the launch of a CBDC in the United States by providing “secure central bank accountability in the digital financial ecosystem.”
Last year, Visa partnered with ConsenSys to bring CBDCs into existing payment networks.
In its report, Visa said it is “developing or participating in alternative payment systems or products” that could potentially disintermediate its role, some of which include “stablecoin-based payment initiatives.”
In a section titled “Competition,” Visa named among them “digital wallet providers” and “alternative payment providers,” which included “cryptocurrency platforms.” While these places are primarily focused on e-commerce and mobile payments at the moment, the company expects them to “extend their offerings to the physical point of sale.”
“Technology and innovation are changing consumer habits and driving growth opportunities in e-commerce, mobile payments, blockchain technology and digital currencies,” the company stated, adding that crypto payment platforms “can be both a partner as a competitor for Visa.”
Damage to reputation
Cryptocurrencies pose not only technological threats and opportunities for Visa, but reputational ones as well. The company’s report claimed that its brand could be negatively affected when its services are used for “legal, but controversial” products such as cryptocurrencies, equating them in this regard to “adult content” and “gambling.”
A month before FTX went bankrupt, Visa planned a partnership with the exchange to offer a cryptocurrency debit card in 40 countries. The show was canceled shortly after the bankruptcy.
