Visa Explores Accepting USDC Payments on Ethereum Network
Cuy Sheffield, the Head of Visa’s Crypto Division, announced on Sunday that the company has begun testing its ability to accept payments in USDC on the Ethereum blockchain. Sheffield made the announcement during the first session of the StarkWare 2023 meetings held in Tel Aviv.
Visa and USDC
Visa currently allows payments in traditional fiat currencies and automatically converts dollars into euros for cross-border transactions. The company’s goal is not to allow USDC to be sent from a Visa card over the Ethereum network, but rather to process incoming transactions in USDC on Ethereum.
While these are internal technical tests, the fact that Visa has a dedicated Crypto Division suggests that the company is serious about exploring this avenue. In the future, Visa may be able to draw funds from an Ethereum wallet in USDC, in addition to drawing from a bank account in traditional fiat currency.
What is USDC
USDC, also known as USD Coin, is a stablecoin issued in ERC-20 format on the Ethereum blockchain. To be transacted, USDC requires a transaction on the Ethereum blockchain or via a layer 2 solution such as Polygon, Arbitrum, or Optimism.
Circle is the issuer of USDC, but Coinbase also plays a significant role in the partnership. As a publicly traded company, Coinbase brings legal and administrative obligations that make USDC the safest stablecoin. USD Coin is fully collateralized with US government debt bonds (77%) and cash dollars (23%).
Competing with Tether (USDT)
Despite USD Coin’s security, Tether’s USDT remains the most widely used stablecoin. USDT has a higher market capitalization ($68 billion) and much higher trading volumes compared to USD Coin ($41 billion). On crypto exchanges, USDT has by far the largest trading volumes, while USD Coin has 14 times less volume, including on DEXs.
USDT has two key advantages over USDC. The first advantage is its ability to be traded on multiple blockchains, including Tron and Ethereum. Tron allows for faster and cheaper transactions, leading to more USDT transactions on Tron than Ethereum. USDC, on the other hand, is tied to Ethereum, reducing its potential for use.
The second advantage is that USDT allows for more anonymity in transactions compared to USDC. While on-chain transactions are public, subsequent transactions can be done with anonymous P2P wallets after the initial KYC. However, it is more difficult to exchange truly anonymous USDC, as most stablecoin trading takes place on exchanges that require KYC. Circle and Coinbase’s need for anti-money laundering controls make transaction controls for USDC more stringent, leading crypto users to generally prefer Tether.
Why Visa Chose USDC and Ethereum
Visa chose to accept USDC because of the backing of Coinbase and the US-regulated company Circle. In contrast, the absence of a US-regulated company behind USDT makes it difficult for companies like Visa to adopt it. The choice of Ethereum was driven by the fact that USDC is primarily traded on the Ethereum network and is also one of only two high-security P2P crypto networks, alongside Bitcoin.
Visa is playing it safe by avoiding unstable stablecoins or insecure blockchains, such as the collapsed UST on Terra or USDD on Tron.
Visa vs Mastercard
While Visa has a successful business based on