Visa has announced the launch of a Universal Payments Channel that will support transactions between stablecoins and CBDCs.
Visa launch stablecoin and CBDC Universal Payments Channel
It an ambitious idea from Visa at this time as it hopes to establish a payment gateway channel to rival the payments system that exchanges fiat currencies at this time.
The concept, called Universal Payments Channel (UPC), outlines how various blockchain networks can be interconnected to allow the transfer of CBDCs. It shows how Visa can help exchange various CBDCs built on different blockchains in the future.
The project is still in its early stages and the timelines have not been announced as yet but with the resources it has, there is little doubt that it would have the capacity to get a project of this scale, done.
The Universal Payments Channel would help to freely exchange stablecoins and CBDCs, like those announced by the likes of Nigeria and in the works from countries like China, to be freely exchanged with one another.
This assumes that stablecoins and CBDCs would be here to stay and they would need to supplement each other and also be able to work with other CBDCs for the digital payment system to be able to rival that of the fiat payment system that we have now.
The platform is expected to work like a Layer 2 solution where the initial transaction processing happens in a different layer and not on the blockchain as the blockchain tends to slow down processing and also increase fees.
The transactions, after being processed, would be confirmed on the blockchain and this would help to combine the speed of the legacy networks that we have now with the transparency and the security that the blockchains offer.
The proposed payments channel is likely to have its own processes and policies and it would need the companies that back the stablecoins and the countries that issue the CBDCs to be receptive enough to make their digital currencies compatible with the new payment channel.
This could be a roadblock in the long term with many countries still reluctant to accept stablecoins and the notion of CBDCs and even those who accept these ideas might be reluctant to participate in a private payment channel and may choose to have their own channel.
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