Visa Expands Ecosystem For Crypto-Linked Cards As Spending Tops $1B

Visa said it had struck partnerships with more than 50 cryptocurrency platforms and exchanges to allow end-users to spend digital currencies at 70 million merchants globally via crypto-linked cards.

The announcement came in a company blog post on Wednesday (July 7), which also noted that more than $1 billion had been spent across those crypto-linked cards through the first half of the year. Visa’s Global Head of Fintech, Terry Angelos, told Karen Webster that enabling the digital currency traditionally held in accounts, exchanges or platforms to be spent will expand the crypto ecosystem itself.

In terms of the mechanics, Visa said merchants don’t have to accept crypto at the point of checkout — individuals can “tap and go” as usual, while on the merchant side of the equation, there is no need to build in new acceptance points (such as terminals) or hold cryptographic keys.

Angelos also pointed to the availability of spending fiat to earn bitcoin back — a rewards program that mimics the cash back rewards or airline miles programs that, at a high level, increase stores of value as members spend money.

For example, Bitcoin rewards programs are being debuted via offers such as BlockFi‘s Rewards Visa Signature Credit Card, where the perks are transferred back to holders’ accounts that the firm holds.

“We have other programs coming down the pike that will have similar mechanisms,” he said, contending that it’s a low-risk way for consumers to open up a brokerage account and “build bitcoin holdings just by buying coffee.”

Though exchanges are regulated, the price and volatility commonly associated with bitcoin are not. Angelos explained in an illustrative example that a BlockFi account would be opened on that platform, custodied and held for an individual at that institution. They may have an account where they purchase bitcoin, and the activities can be tied together — spending on a Visa crypto card can accrue more holdings in the brokerage account.

“This is merely an asset that is assigned to me as part of my spend,” said Angelos.

Stablecoins And CBDCs Too 

This week’s announcement of the 50 new partners follows a similar move by Visa in March that enabled USD Coin to be used to settle transactions, where the settlement was done in tandem with and Anchorage, a digital-only bank.

Angelos said the two announcements represent Visa’s support for cryptos and digital currencies in their current (and likely future) iterations. Visa, he said, has been making distinctions between different types of crypto assets.

Cryptos like bitcoin, of course, are not backed by fiat and may just be emerging from consumers’ “buy and hold” mindsets as a category of spend. Stablecoins have the characteristics of digital currency, backed as they are by fiat.

But, he noted that there had not been much appetite or demand for merchants to accept crypto or stablecoins as payment.

“We think that demand will come,” he added, “which means we have the rails to support that demand.”

Stablecoins are finding significant acceptance on the commercial front, where partnerships with Circle are enabling B2B payments as an alternative to ACH and checks in a $120 trillion market. Elsewhere, some of Visa’s partners are paying employees in stablecoins, he said.

Turning to CBDCs, he said, central banks and governments have effectively been creating stable coins for fiat reserve, in some cases on open-source blockchains and in other cases, proprietary systems.

He said Visa has a role to play in each of those areas — for now, most visibly in cryptos where the company can be likened to “the on ramp and the off ramp.”

At a high level, Visa, he said, is continuing to serve as a bridge between the crypto ecosystem and the payment firm’s global network of tens of millions of merchants and 10,000 financial institutions.

Delving into the partnership roster announced Wednesday, he pointed to FTX and TK, among a host of regulated wallets and exchanges. He noted that all together, the firms represent consumers’ holdings of trillions of dollars of digital assets and hundreds of billions of dollars of assets stored on exchanges where consumers have already gone through know your customer (KYC) and anti-money laundering (AML) checks to verify their legitimacy.

Contrary to most other commerce conducted using cryptos, Angelos pointed out that consumers using the Visa-linked crypto cards can reverse transactions and receive charge backs, can call their banks to cancel transactions and also spend crypto using QR codes.

Many of the partners grouped in Wednesday’s announcement are starting to issue Visa cards, he said, so that their consumers can spend against those digital assets.

All of those crypto wallets, said Angelos, are held to the same standards applied to any other issuer — they are licensed by Visa or have gone through a bank sponsor. Visa, he added, also vets the partners’ KYC and programs and uses blockchain analytics tools to examine their processes and that they meet regulations in jurisdictions where cards are issued.

The Desire To Spend 

The desire to spend cuts across demographics, he said, mirroring PYMNTS’ own research done in collaboration with BitPay, where as many as 12 percent of individuals said they owned crypto, and a majority of individuals surveyed have stated they intend to use crypto to make purchases.

Visa, said Angelos, is seeing “everyday spending” on crypto-enabled cards, wielded by young millennials all the way up to older consumers who have been holding crypto as a form of wealth diversification.  Many holders have been investing some portion of their income in digital assets and want to spend with the ease and convenience of cards.

Increasingly, he said, consumers want to spend the value appreciation that’s accrued against their crypto holdings. He noted that returns and yield are lures in the stablecoin realm, where high yield accounts at Coinbase are tied to USDC.

Though the $1 billion that has crossed crypto-enabled cards to date is a small number in the context of Visa’s more than $10 trillion in spend, “if you consider that this category didn’t exist in a meaningful way a year ago, then this certainly points to momentum,” he told Webster.