Visa is working on a 'universal payment channel' (UPC) that enables interoperability between different digital currencies such as CBDCs and private stablecoins.
The UBC acts like a hub, interconnecting multiple blockchain networks and allowing for the transfer of digital currencies.
"Think of it as a “universal adapter” among blockchains, allowing central banks, businesses, and consumers to seamlessly exchange value, no matter the form factor of the currency," says Visa global CBDC product lead Catherine Gu in a blog.
Gu says that such as system would, for example, enable someone in the US to send $500 in USDC to a friend in London, with those funds automatically converted to digital British pounds before they arrive in her CBDC wallet.
This will prove useful because central banks around the world are pushing ahead with CBDC projects, while private stablecoins are also on the rise.
Writes Gu: "As the number of digital currency networks increases — each with unique design characteristics — the likelihood that consumers, businesses, and merchants are transacting on the same network and utilizing the same type of money decreases."
In a research paper outlining the mechanics of UBC, Visa sets out how it can connect different blockchain networks by establishing dedicated payment channels between them — whether that means connecting CBDC networks between countries or connecting CBDC networks with vetted private stablecoin networks.
"We believe that for CBDCs to be successful, they must have two essential ingredients: a great consumer experience and widespread merchant acceptance. It means the ability to make and receive payments, regardless of currency, channel, or form factor. And that’s where Visa’s UPC concept comes in," writes Gu.
Read the paper