‘We are committed to saying Visa should be a crypto-native company’: Cuy Sheffield on Visa’s crypto strategy
- While most FIs wait for crypto regulations to kick in to get involved, Visa is rolling up its sleeves and stepping in to contribute towards its architecture.
- We sat down with Cuy Sheffield, head of Visa Crypto, to learn more about shifting trends in the space, how Visa wants to shape blockchain payments, and what the future of crypto looks like.
Visa Crypto recently made an announcement. No, not for another credit card launch. The digital payments giant wrote a proposal about automating recurring payments on the Ethereum blockchain.
The crypto landscape is built on the shoulders of whitepaper proposals coming from blockchain developers using GitHub accounts. And while most FIs wait for crypto regulations to kick in to get involved, Visa is rolling up its sleeves and stepping in to contribute towards its architecture.
We sat down with Cuy Sheffield, head of Visa Crypto, to learn more about shifting trends in the space, how Visa wants to shape blockchain payments, and what the future of crypto looks like in the next ten years.
Until the FTX blow-up, exchanges were the main playground for FIs’ involvement in crypto. Speculation was the name of the game. Visa partnered with over 65 crypto companies looking to receive payments or issue cards. According to Cuy, that was the number one use case.
“That's the way the cards were marketed. It was like: spend your Bitcoin,” says Cuy.
Most consumers interacting with these cards were cryptomaniacs – people on a cryptocurrency exchange trading Bitcoin. They wanted a way to cash out their gains and spend them.
There are many other products that Visa is working to create with crypto clients. But with prices plummeting, partnerships with crypto exchange platforms are becoming less popular.
As the tide turns, Visa is seeing the trend shift towards digital fiat-backed currencies like stablecoins. According to Cuy, consumers outside the United States are no longer looking at crypto as a speculative asset class, but as a way to access US dollars.
“Many of the products we're working on with our partners tend to be consumers holding dollars in stablecoins on a crypto platform," he says. "How can they spend that form of a dollar at any place that accepts Visa?”
In October, Visa filed patents for launching cryptocurrency wallets and software for auditing cryptocurrencies. The company believes blockchain technology will drive significant innovations in payments and financial services.
Visa thinks it should be at the forefront of understanding how blockchains work, and their partnerships with banks, merchants, and fintechs require them to take on a leadership position.
“We're doubling down on our efforts to learn by doing, experimenting, and building a team with knowledge and expertise,” Cuy told Tearsheet.
Visa's recent announcement is about how it has been writing smart contracts, a new form of software development. The company is redefining smart contracts to suit FIs and creating new user experiences for consumers who want to enable automatic recurring payments on the blockchain. That's not something that exists at scale on blockchain networks today.
How Ethereum smart contracts usually work. (Source: Visa)
Currently, non-custodial wallets require a signed authorization to make a transaction. The private key holder has to sign every time they want to process a payment. And if they want to automate recurring payments, they need to put their assets in a custodial wallet (like an exchange), and they have to make those transactions on their behalf. With the lack of trust surrounding centralized crypto exchanges, Visa worked on a solution.
Visa Crypto's proposal for account abstraction. (Source: Visa)
To get it done, Visa Crypto borrowed the concept of account abstraction developed by Vitalik Buterin in 2017. They experimented with a layer 2 network called StarkNet that sits on top of Ethereum, and then wrote a smart contract to delegate a trusted third party to pull funds out of a non-custodial wallet on a recurring basis. Visa says all of this is intended for research and building their technical knowledge.
Visa Crypto's account abstraction code. (Source: Visa)
“It's still very early, and we're not committing to launching live products and commercializing with the announcements,” says Cuy.
Visa's strategy: the DEFI mullet
The dreaded crypto winter hasn't changed Visa’s strategy. It is “committed to saying Visa should be a crypto-native company.” Visa's crypto team was created during the last bear market, and it operates with a long-term perspective of how crypto will impact payments over the next ten years.
Visa Crypto is clear that its North Star is becoming the bridge between crypto technologies and the payments ecosystem. It sees stablecoins as a “killer app on blockchains.” The features it is building are centered around making dollars (in the form of stablecoins) run on blockchains to facilitate a range of payment use cases.
"I think the DeFi mullet means that crypto will only become mainstream when it moves to the backend – when consumers don't have to learn and understand, which blockchain network am I on? Or what's a private key? They should be able to use it to solve a problem," says Cuy.
Some of the new-generation products emerging from Visa’s Fintech Fast Track Program are wallets that look and feel like a version of Venmo, but happen to be using crypto technology on the backend. The goal is not to pick winners and losers – the company is open to working with every fintech company to contribute to the open-source technology ecosystem.
“And then it's a question of what ways we can commercialize it for Visa for our clients in the future. But for now, we want to crank out research in demos and proof of concepts to show what's possible,” says Cuy.