Visa is working with its partners to launch programmable CBDCs thereby optimizing capital flows to SMEs.
Although blockchain technology has shown its prowess in multiple business verticals, its adoption hasn’t been fast enough. However, payments giant Visa Inc (NYSE: V) is now working towards pushing innovative blockchain use-cases towards real-world use cases.
As part of its most recent LIFT Challenge, Visa is exploring blockchain-based use cases for Brazil’s central bank digital currency aka Digital Real. For this, the payments giant has also partnered with companies such as Microsoft, Agrotoken, and Sinqia.
With its LIFT Challenge participation, Visa is building a programmable finance platform for Small and Medium Enterprises (SMEs), thereby offering them access to global capital markets. This will also improve operational processes, facilitate interoperability between currencies, as well as uncover new growth opportunities.
Visa and Blockchain Helping Small Businesses
SMEs play a crucial role in negotiating favorable contracts, however, the financing methods of today are quite outdated leading to losses for farmers. Visa aims to solve this lacuna by providing farmers with more timely and greater access to a global pool of investors for timely investing.
Thus, it allows SMEs to get the best price discovery for their goods. In this way, Visa plans to empower SMEs with additional options to finance their businesses in a secure and frictionless manner. They will optimize existing money movement operations while alleviating the pain points caused by the inaccessibility to traditional services. While working on Brazil’s CBDC Digital Real, Visa seeks to address these issues at hand. Speaking on the matter, Catherine Gu, Global Head of CBDC for Visa said:
“Small businesses are essential contributors to our local economies, such as in Brazil where they employ over half the population and contribute to nearly a third of the country’s GDP. At Visa, we are committed to help them grow, exploring new technologies that will empower them to more easily maintain and expand their business operations.”
Enabling Programmable Finance in CBDCs
As major economies across the world are exploring CBDCs, Visa is working with its partners to demonstrate how CBDCs can enable cross-border payments programmatically, while providing global investment resources to SMEs.
The programmable aspects of CBDCs will allow delivery as well as payment of assets when certain conditions are met. This opens the door for efficient capital usage with reduced counterparty risks, backed by the stability, security, and safety offered by the central bank.
The prototype platform built by Visa brings all the current financial processes and assets on-chain. This will allow farmers and SMEs to tokenize traditional financial contracts. The press release notes: “Combined with tokenization, Visa implemented a new onchain sealed-bid auction mechanism through smart contracts to enable a global pool of investors on the blockchain to participate in the financing process, achieving competitive price discovery.”
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
