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Just as governments across the globe explore releasing central bank digital currencies (CBDC) amid fears that rapidly growing cryptocurrencies could destabilize financial markets or replace fiat currencies, Visa Inc. joins its rival Mastercard Inc. in offering central banks a way to test retail applications for digital currencies they might issue.

Visa is teaming up with blockchain software company ConsenSys Inc. to begin piloting a program after discussions with roughly 30 central banks about goals related to government-backed digital currencies.

Catherine Gu, Visa’s Head of CBDC, said, “CBDC could expand access to financial services and make government disbursements more efficient, targeted, and secure – that’s an attractive proposition for policy makers. With CBDC, a central authority could send fast payments to a targeted set of users and program specific spending parameters." 

“Residents of a particular community facing economic hardship could receive immediate government assistance directly in their digital wallets, usable for buying groceries or other necessities at merchants accepting digital payments — no waiting for a check in the mail and for those funds to be cleared in your account. That’s just one potential use case," she said.  

Cuy Sheffield, Visa’s Head of Cryptocurrencies noted, “we think that stablecoins and CBDCs will coexist in the future and there’ll be a number of different approaches to creating products based on that."  

Payment service providers likely see government-backed digital assets as a safe and secure way to utilize blockchain, which aims to be faster and more efficient than traditional electronic transactions.

In another related development, Mastercard launched a similar CBDC testing platform in 2020. Additionally, Visa currently offers payment cards linked to USD Coin, a stablecoin issued by a consortium that includes Circle Internet Financial Inc. 

Nigeria and the Bahamas are among the nations already circulating CBDCs, and China is piloting a digital yuan in several cities before plans to push use at the Beijing Winter Olympics. 

ConsenSys, led by Ethereum co-founder Joseph Lubin, has worked with several central banks to test CBDCs including the Hong Kong Monetary Authority, the Reserve Bank of Australia, and the Bank of Thailand. The U.S. Federal Reserve is expected to publish a report evaluating a government-backed virtual currency in the coming weeks.

 

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