Cuy Sheffield, Visa’s head of crypto, discusses Visa’s crypto game plan, stablecoin regulation, NFTs, and more. Show highlights:
- Cuy’s background and his journey down the crypto rabbit hole
- how Visa and cryptocurrency can coexist
- why crypto companies and fintech companies are similar
- what Visa is trying to solve for consumers regarding cryptocurrencies
- how cross-chain payment infrastructure would work
- why Visa requires enhanced diligence for crypto companies
- what countries can learn from stablecoins when building CBDCs
- why Visa is creating a universal payment channel for CBDCs and other cryptocurrencies
- why Visa chose USDC to begin making payments with
- the two main reasons why stablecoins are used (hint: it’s not for buying cups of coffee)
- how cryptocurrency is changing financial education and inclusion
- how crypto’s open-source ethos is helping underserved and emerging markets build financial infrastructure
- why NFTs are Cuy’s favorite topic
- how NFTs level the playing field for black artists (and artists in general)
- why Visa purchased a CryptoPunk and how other businesses could leverage NFTs
Thank you to our sponsors!
- Twitter: https://twitter.com/cuysheffield
- LinkedIn: https://www.linkedin.com/in/cuy-sheffield-72082126/
- NFT collection: https://tryshowtime.com/csheffield
- Thoughts on payroll deposits
- DAOs as chaotic organizations
Visa Crypto Plays
- CryptoPunk purchase
- First smart contract on Ropsten
- NFT research report
- Cross-chain Interoperability
- Visa + USDC
- Digital currency whitepaper
Hi, everyone. Welcome to Unchained your no-hype resource for all things crypto. I’m your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago. And as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the October 12th, 2021 episode of Unchained.
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Today’s guest is Cut Sheffield Visas head of crypto. Welcome, Cuy.
Hello, thanks for having me. Great to be here.
Let’s start by having you tell us how you got into crypto and came to be the head of crypto at Visa.
Coming out of college, I worked for a startup that was called TrialPay, which is really a FinTech and mobile advertising company. Visa acquired TrialPay in 2015. I was employee number a hundred-something — it was my first job out of college. And when Visa acquired us, I didn’t know anything about payments or Visa. And I didn’t know anything about crypto. Through the acquisition into the company, I started going down the payments rabbit hole — just trying to understand what does Visa do and how does it work? So I got to spend a lot of time with some of the people who’ve been at Visa for a long time and, and helped to build the business. And then I happened to be living in San Francisco with some friends, and this was probably early 2017, and we randomly went down the crypto rabbit hole.
And so we were just in our living room with a few roommates, just trying to understand what was going on in crypto. And what I found was that there were people at Visa who understood everything about payments and the existing payments ecosystem, and they didn’t really know anything about crypto. It was brand new. And then, as I discovered Crypto Twitter and started to meet people in crypto, there were people who were seemingly experts and knew everything about crypto, but they didn’t know a single thing about Visa and existing payment systems and how Visa worked.
So it seemed very clear early on that the future was some intersection of the two. I basically decided that I wanted to spend the next decade of my career of how crypto and existing payment systems come together and will interact with each other. And so I became the annoying crypto person inside of Visa.
That wasn’t my job, but what became this passion and to the point of an obsession where I just started asking a lot of questions and figuring out — what are we doing? Who’s working on this? What should we be doing? I was really fortunate that I had a number of mentors and sponsors and supporters who were also interested in crypto and we really worked together and made progress every single week to the point where we created a crypto product team in 2019. I think one of the things that really drew me in to crypto in the first place, and why I got so interested in it, was because I was a sociology major in college. I’m a big liberal arts proponent. And to me, sociology was really, it’s the study of the obvious. You’re asking questions of why is the world the way it is today?
What are institutions and how have those institutions evolved? And what I’ve realized many years after college was I was fortunate to get to go to a great school and get a degree. And I had never really stopped to analyze and think about: what is money? And I didn’t really understand what money was as a concept. What was the history of money? How did it evolve in the past? How can technology change it in the future? And as I got into crypto and started reading and learning and thinking about crypto, I was like, crypto is the sociology of money. And to explain Bitcoin and to explain what crypto is, you have to have a reference point. You have to go back to, okay, how is Bitcoin different than dollars? And when I realized that everyone cares about dollars, everyone needs money. Very few people stopped to ask what is money? And so I became obsessed with that concept in that question of what is money.
And if you work at a large payments company, you care a lot about how money moves. But to me, it just seemed like such an obvious thing that everyone should stop to question and think about what money is and how it’s evolving, and to make sure that we can evolve products and solutions as new forms of money and merge.
That’s hilarious. I love that story. It reminds me of how I became the annoying crypto person at Forbes for a while. So I relate in a lot of sense. And actually, when you talk about sociology, the first employee at Coinbase, Olaf Carlson-Wee, who is now the founder of Polychain Capital, he also studied sociology and wrote his thesis on Bitcoin and things like that. Clearly there’s some overlap there.
When you talk about how you started thinking about how Visa or payments will intersect with crypto, it’s commonly thought that blockchain technology and crypto or DeFi or any of these things will disrupt centralized financial entities, such as Visa. So when you think about putting those two together, what does that look like to you?
It’s a great question. First, what I realized pretty early on is that decentralization is not really this binary. And I think too often, it’s really seen as you have a centralized system or you have a decentralized system. When in reality, decentralization is more of a spectrum. You can have different payment systems, different layers of those systems, different applications, that can exist all across that spectrum. And they can optimize for different use cases and solve different problems.
And so it seemed very clear early on that it’s not as simple as this winner take all where today it’s either all centralized payment systems and in the future, it’s all 100% decentralized. At each layer, there can be multiple products and technologies that exist that multiple points on that spectrum serving different purposes.
I realize it’s a lot more complex than just that very simple dichotomy. When we really started at Visa thinking deeply about crypto, we started just looking at this new class of FinTech in the crypto wallets and exchanges. So that was really the first step in saying that there are crypto wallets and exchanges that are growing rapidly, that have millions of consumers, and have billions of dollars of assets on their platforms. These wallets tend to be pretty ambitious and they want to be able to expand and offer more products and services. But to do that, they need to have better fiat on-ramps and off-ramps. That became a very clear opportunity where Visa has these existing products, the ability for a merchant to accept a card, the ability for an issuer, a FinTech or financial institution to issue, or offer a card to consumers.
And it was really this new segment, this new client vertical, that started coming to us and say, hey, like, how do we make it easier for someone to purchase crypto with a Visa debit card? And then how do we enable crypto to have more utility, whether it’s Bitcoin or whether it’s a, a stablecoin where you can actually use that and you can spend it somewhere.
And at the same time, particularly back in 2018, and even still today, very few merchants directly accept a crypto, a Bitcoin, or a stablecoin purchase directly over a public blockchain. And so if you have all these consumers in these new wallets with all of these assets, that they want to be able to use those assets, there was this opportunity for Visa to start to become a bridge. Where we could be the bridge between crypto wallets and assets in our existing network of 70 million merchants today.
And so that just became a very obvious place to start, is how do we lean in to this new vertical and really be a partner and help this new set of fintechs navigate bringing fiat in and converting crypto into fiat to get it out.
And so that was the first approach. And in many ways you could look at every crypto wallet and exchange and say, wait a minute, these are centralized companies. That’s what Coinbase and FTX and these major exchanges are. Sure they sit on top of a decentralized network, but they’re really not that different in principle then neobanks and other fintechs. And they have some of the same ambitions and some of the same needs that our existing clients had. That was the first place that we started, is Visa becoming a bridge and helping crypto companies be able to connect into the existing payments ecosystem.
And then over time, what we’ve seen is there’s also the opportunity to do the reverse. We work with over 20,000 financial institutions and banks all across the world that are a part of our network. And we think over time, it’s likely that most of them, if not all of them, are going to want to interact with the crypto ecosystem and with decentralized networks in some way. And so how can we become the bridge between banks and crypto, where there’s this complex infrastructure and new technologies that they have to navigate, and it’s going to be very difficult for them to do that on their own. And so I think we see Visa’s role as really an enabler. We’re a payment infrastructure company. We have one global network that we own in Visanet that works at 70 million merchants. And then we have infrastructure to help originate and receive payments across many other networks. Blockchains and decentralized systems are just additional networks that we can help our clients be able to utilize.
Let’s talk about kind of those beginning partnerships and how you started getting involved. I understand, at least from some of my reading, that technically it was a little bit challenging or you guys had to get creative. And so I’m curious for when you do work with some of these different, it can be crypto companies that are issuing credit cards, how is it that you had that work technically?
By the way, before you answer, I should just say, because I know you have a partnership with crypto.com, crypto.com is a sponsor of my shows, which I just wanted to make as a disclosure.
Tell us you know, what, what that looks like on the backend.
To clarify, the consumer product, and the experience that we want to enable, and we’ve started to do with partners like Crypto.com and Coinbase and FTX, and others, is a consumer should be able to hold a balance that can include many different types of assets.
Those could be traditional dollars. Those could be crypto dollars in the form of stablecoins. Those could be Bitcoin or other cryptocurrencies. They should be able to go to any of the 70 million merchants across the world that accept Visa and tap to pay with a Visa credential. It could be virtual, within the app or Apple Pay. It could be physical and be able to pay for goods and services at those merchants in a single tap at the point of sale. And so that’s the experience that we think is really important to enable.
One of the things that that solves is increasingly we think consumers want to have access to the liquidity from their assets. They want to be able to invest and then decide they want to spend and be able to immediately buy what they want. Rather than if you think about the alternative of holding Bitcoin and you want to make a purchase somewhere — that merchant doesn’t accept Bitcoin. Okay. So let me plan ahead. Let me sell my Bitcoin, let me use ACH to push that fiat back to my bank account, gets there in three to five days. Then I use my existing debit card.
We’re in this world where people expect 24/7 instant conversions between different assets that they have. And so that’s a product that we think is really valuable and makes a lot of sense for consumers who are holding assets in crypto and in stocks and other assets in the future.
Now, the question is how do you enable that? Because it would be really confusing and challenging for your local dry cleaner, coffee shop, or every merchant to be able to directly receive and have an acceptance point for someone to scan a QR code and to pay in Bitcoin. But not just pay in Bitcoin. And I think this is one thing that is not very well understood.
If you’re a merchant and what you care about the end of the day is selling a product or service. That is your business. You want to support every payment method that a consumer might want to use. And it used to be a handful of card networks. Now, if you want to accept crypto, okay, do you just want to accept Bitcoin? Or do you want to accept Bitcoin and other cryptocurrencies? Do you want to accept stablecoins?
If so, which ones, what about the different blockchains that those stablecoins are on? There is no universal, here’s a QR code that I put up at my local dry cleaner, and any of the thousand cryptocurrencies or stablecoins and dozens of blockchains that they could run on has a seamless experience to tap in impact.
And so that becomes a major challenge in barrier to having direct acceptance. We think some direct acceptance will happen over time, but it’s not an easy problem to solve. And so for that dry cleaner who just wants to get paid, being able to have a consumer spend from the assets that they want, that they’re holding, and then having that local merchant receive the dollars to their bank account that they’re used to, without having to do anything differently, or understand it, or think about it, we think is a really valuable bridge that needs to exist.
Now, the question is, how do you enable that on the backend? And so today, the way that that works, is there’s a conversion that happens between whether it’s the Bitcoin or the stablecoin into an underlying currency. While it feels like you’re tapping to pay with your Crypto.com Visa card, and you’re spending from a balance of Bitcoin or a balance of a stablecoin, Crypto.com can actually convert that on the backend into fiat. And that fiat can be settled with Visa. Visa can then pay the merchants bank in that fiat.
Now over time, what we’re really focused on, is how can we evolve and upgrade our capabilities to make it even easier for some crypto wallets and exchanges. And so this is what we announced with Crypto.com, where instead of Crypto.com having to convert, let’s say they’re starting with a consumer’s balance in a stablecoin, instead of them having to convert that into a traditional fiat in a bank account before they can settle up their bill with Visa, the total transactions of all their consumers, can we enable them to just send us that stablecoin? To just send us USDC to an account that Visa can have at a custodian starting with Anchorage the same way that we receive fiat to bank accounts that we have at large global banks.
And so we’re continuing to really focus on how do we upgrade our core infrastructure in the backend around making these seamless conversions. The same way that Visa can convert dollars to euros, when you’re spending cross border, we think Visa should be able to convert traditional dollars to digital dollars or the reverse. And it’s really just converting different form factors of the same currency. That’s what requires crypto infrastructure, requires custody, it requires liquidity providers. There are a lot of these different pieces that we’re investing in to really improve that backend process and make it even easier for crypto wallets and exchanges, to be able to offer these cards.
And I saw that The Block reported that Visa and MasterCard actually do enhanced diligence for crypto firms that offer credit cards over what they would do for typical issuers. And I was wondering why that was when, as you probably know, Chainanalysis has that really comprehensive crime report, and they found that, at least for 2020, the percentage of crypto transactions that were criminal nature was less than 1%. It was 0.34%, which is a fraction for the traditional financial world. So it was curious about that.
What’s really interesting as we move into this crypto world and this crypto ecosystem, and having clients who are directly interacting with blockchain networks and in crypto wallets and exchanges, is that there are new compliance tools that are available, that are extremely effective. And so if we want to ensure that the barrier to entry to creating a crypto wallet and exchange is pretty low. And ultimately we think that that’s a good thing, that there are thousands of different crypto wallets and exchanges all over the world. We hold every one of our clients and partners to a very high standard on compliance. And that’s part of one of the key values that Visa provides is enabling this network where every participant of the network knows that other participants have been vetted and meet a hard high bar for compliance.
And so when we have this new segment, this new type of client, that is now interacting with these new public decentralized networks, we agree that there could be additional risks based upon activity that can happen on those networks, but there are also additional new tools to help to evaluate and mitigate that risk. We want to make sure that as we partner with every crypto wallet that can meet our high standards, we want to partner with everyone out there, that we have the right tools in place to be able to both vet them as we bring them on the network and to actively monitor going forward. And we think that that’s going to be a really important thing for the industry. And we’re really excited about the innovation and the sophistication of some of these new tools that are emerging. And so we’ve been an active user with our compliance team of a number of these tools for several years now. And so we spend a lot of time really focused on how can you use these new technologies and this new type of software to mitigate risk around compliance and make sure we’re continuing to hold clients that interact with our network to a very high standard.
And so for where you’re going in this work, I did see that Visa recently released a white paper for when it was calling a “Universal payments channel.” And the impetus was that you viewed this as a way to interconnect different blockchains to enable the transfer of central bank digital currencies (CBDCs). And I was curious for your vision of how central bank digital currencies will interact with each other. And just curious also why Visa is pursuing this area now, given that, at the moment, there’s only one really that has been released. I’m curious for your thoughts on that.
I think one of the amazing things about being able to work at Visa and what gets me really excited is we get to work very closely both with a brilliant Visa research team. With PhD’s actually based in Palo Alto, my home office, that I go into, that have been doing cutting edge work on consensus mechanisms, on scalability, on privacy, for several years now. And so we work very closely with them. And then on the other side, we’re interacting with and engaging with most of the major central banks across the world.
One of our key approaches here is that we don’t think it makes sense to look at CBDCs in a vacuum. You can’t just say, okay, here’s CBDC, what could see CBDC be, and ignore everything else that’s happening. We think you really have to understand CBDC in the context of all of the innovation that’s emerging in the private sector ecosystem, in open-source developer ecosystems, what’s happening with stablecoins, what’s happening with public blockchains.
And we think that a lot of the technologies that are being developed in the open-source ecosystem could potentially be applied to CBDCs, or at least can really inform how central banks think about designing CBDC. And so that’s a unique opportunity that we have where it’s almost like we see ourselves as a translator. Like there are these crazy cool new cryptographic primitives, and then there are very high level conversations around policy implications and the CBDC. How do we bridge those two together and help central banks understand what’s happening in the crypto ecosystem? And then help the crypto ecosystem understand what some of the problems are that central banks are trying to solve.
Visa research has done a number of really interesting experiments and papers and work on things like offline payments, on things like payment channels, and smart contracts that we’re then really using to help inform and educate central banks.
The announcement around the universal payment channels is one example.
Then the other way we think about this is that in the future, it’s likely that we’re going to live in a world where there are many different fiat backed digital currencies. And we think that’s the core product. The question is will fiat currencies become digitized? We think so. Then it’s, okay, how and what do those digital fiat currencies look like?
And there are a number of different ways that that can happen. There’s what exists, which are, there are multiple different stablecoins that are growing rapidly. There’s USDC, USDT, there are many different stablecoins that are growing those stablecoins actually run on many different blockchain networks. So you could have USDC on Ethereum, on Solana, on Stellar. And so there’s all this innovation and growth with many stablecoins on many blockchain networks.
And then you have most major central banks exploring CBDC. And it’s likely that at some point in the future, there will be multiple CBDCs. I don’t think every country, it doesn’t make sense for everyone, but there will be some CBDCs that exist. And those CBDCs that exist will likely run on a number of different networks. If we live in a world where you have many different fiat back digital currencies, both stablecoins and CBDC, and many different blockchains, protocols, or networks that they run on ,from public permissionless ones to permissioned ones, there’s just the potential for incredible fragmentation of how will that actually work in practice. The same way that as a consumer you can travel and go to basically any country in the world and you can have a card or credential issued from a bank in San Francisco that you can pay for your coffee in Poland.
And that coffee merchant doesn’t have to think about, okay, who’s the bank in San Francisco that issued this and do we trust them? Are we going to get paid? It just works. And so you’re able to pay with your wallet or your credential issued in San Francisco. And that merchant in Poland receives their local Fiat currency from their bank and everything is abstracted away on the backend. And so now if we fast forward to, if you wanted to enable that in a digital currency world, how could a consumer with a wallet, and by the way, we think most wallets will likely support not every single stablecoin or every single blockchain. It’s pretty hard to ask every wallet to support all of these different networks. And so if you have two consumers, if you have a consumer and a business, if you have two businesses, there could be all these different types of payment flows.
But on one side, you’re going to have someone using a wallet that supports either a stablecoin on one public blockchain. On the other side, you’re going to have someone using a different wallet, that might support a CBDC on another network. And so how can you enable seamless transfer of value that can go across currencies and across networks? And we think that that is an enormous problem and challenge that needs to be solved for digital currency to be useful. We think it’s going to take the entire private sector and public sector working together and payments ecosystem to solve. And we think that some of the potential solutions are likely to come out of a lot of the open-source innovation and development that’s happening in the blockchain ecosystem today. And so we’re really focused on how do we help address those long-term challenges.
And I saw that in order to use the UPC, people will need to register their identity. Does that mean that this is a permission chained. And if so, is it closed source? And for the registering, do people need to give their full KYC? Or like what level of registering is that?
To clarify with UPC, this is super early. This is research. It’s a paper that we wrote. We published our first smart contract to one of the Ethereum testnets. I think that’s a moment — that we actually had a party. We did a watch party as one of our engineers published it or deployed it to the Ethereum testnet. And it really speaks to — we believe that these new technologies, these networks, are going to play a major role in the future of payments. And so we’re learning solidity and we’re writing smart contracts, and we’re really making sure that we’re on the forefront of it. There are still a ton of questions around, how would we implement this? How would it be commercialized? Is it the right solution? The goal was really, let’s build in public.
Let’s put this out there and let’s get feedback. And let’s see what people think about the smart contract. Where did we go wrong? What could be better? And so in no way, is it saying this is the solution, and everyone’s going to use this. And like, here are the rules of how the network works. It’s here’s a collection of technologies that can be used to solve a problem, as a part of a broader exploration around many different approaches to solve that problem. And our goal is to really deeply understand it, to help our clients and help central banks deeply understand it, and then work together with the ecosystem to commercialize and bring to market solutions based upon which of these technologies can solve the problem.
Oh, okay. Okay. So if this comes to fruition, then all these details that I asked about potentially may change. Is that what you’re saying?.
Correct. So this is really focused on the technology rather than the specific rules and compliance of the note.
Okay. All right. So in a moment, we’re going to talk a little bit more about stablecoins. So first, a quick word from the sponsors who make this show possible.
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Back to my conversation with Cuy. So Visa has embraced USDC as a stablecoin. Visa credit card issuers can integrate USDC into their platforms and also send and receive USDC payments. Why USDC out of all the stablecoins?
We’ve been closely following the stablecoin ecosystem for several years now. It’s been really exciting to see just the growth of it and the activity that’s happening across the world and the use cases that are emerging. As we wanted to explore, how can we upgrade some of our infrastructure, our treasury, and enable clients to interact with Visa by sending and receiving a stablecoins, we wanted to start with just where is the demand in the usage in the first place. One of the exciting things about USDC is that we’ve just seen continued interest from our clients, many of which are very actively using it within their own treasury operations and infrastructure. And so when we talk to clients like Crypto.com, like FTX, many of them are paying their employees in USDC.
Many of them are paying vendors in USDC. And so it really starts with where is their demand and usage today from clients that we serve? And how can we really look to meet them where they are, and to support the currencies that they’re already using as a part of their business? And then it’s looking closely and really trying to understand how does that stablecoin, how is it designed? How is it governed? What’s the process around redemption?
To clarify, like we see Visa’s broader role, as we should currency agnostic. We should be digital currency agnostic. And we support hundreds of different currencies on our network. And if our clients want to use new digital currencies, we should support them as well. And so it was really where do we start?
And starting with a stablecoin that already has significant usage from many of our key clients made a lot of sense. But we plan to add support for other stablecoins and other networks. And so by no means was this exclusively USDC as the only thing that we would ever support. But we were excited to see a lot of the demand and usage already and that really informed it.
We’re starting really small. We did some early tests with Crypto.com and we’re progressing towards a small pilot. So it’s not, we’re opening the flood gates and now everything is USDC. It’s how do we upgrade our infrastructure to support this new form factor for the dollar and slowly roll out to where it’s an option that our clients, if they so choose, can settle their obligations of Visa by sending us a value in that stablecoin.
I’m sure you’re well aware at this moment in the US stablecoins are almost in, I don’t know if regulatory limbo is quite the word, but there’s uncertainty for sure. The Wall Street Journal reported that the Biden administration wants to regulate stablecoin issuers as banks, and CoinDesk reported that the SEC has issued an investigative subpoena to Circle, which is part of the consortium behind USDC. Although it’s not clear what the focus of the investigation is. But since Visa is working with Circle and and USDC, and I know you personally are involved in the Digital Dollar Project. I just wondered kind of right now at this moment, what role you think private stablecoins will play or should play?
And by the way, the other comment that I wanted to mention was that Chairman Powell kind of said a good argument for having a CBDC is that then you wouldn’t need the cryptocurrencies. So that was kind of an interesting comment there. So it was curious for your thoughts on the role of private stablecoins.
I have a ton of thoughts. I think to start, it’s very clear that stablecoins and CBDC are top of mind topics for most policymakers and regulators across the world, outside the United States. We’re closely engaging with regulators on the topic. We think it’s really important to have consumer protection, to have regulatory clarity, to have standards, and make sure that the way that stablecoins are operated is really in a safe way. And so that’s something that we think is productive and requires both the public sector and the private sector to work together to figure out how should that work? What should the standards and the requirements be?
I’d say on the other side of that, we think it’s really important to understand how stablecoins are being used today and what the the potential benefits that they could have, and what are the opportunities for stablecoins?
And so you can’t just focus on the risks. You have to focus on, like, yes, we should mitigate the risk, and we should have clarity in rules around that. But we think there needs to be a broader conversation around what the opportunities, what can you do with a stablecoin that you can’t do with existing dollars or existing payment rails that people use right now? And I think that that question is also incredibly useful for central banks that are interested in CBDC because it’s really this test in this laboratory where you can see why are people using this. Where’s the demand coming from free digital version of a fiat currency? What are the use cases where people want a digital version of fiat currency? And it’s very clear, looking at the growth, there is significant for stablecoins.
And so what are the properties that they have and how are they being used? We think are really important elements that can inform if you want to design a central bank digital currency, would you want it to have some of those same properties? Would you want it to solve some of those same use cases? And so, again, we can’t just think about CBDC in a vacuum and then regulating stablecoins over here. We have to understand what are stablecoins to be used for, what are the benefits, what are the opportunities there? And I think within that, increasingly, what we’re seeing with stablecoins is that today the predominant use cases are not consumers buying their coffee. Consumers are not just rushing into moving their bank accounts into stablecoins and just holding stablecoins, which I think is one type of a concern that regulators and policymakers might have.
And I think, frankly, when people think about CBDC, one of the use cases that someone might think about it, how do you use CBDC to buy your coffee? And it’s like this quintessential payment use case that’s like, everyone just defaults to like buying your coffee. And I think you have to start with like, what problem does this solve? There are many ways to buy your coffee today, and it works pretty well for most participants in the ecosystem.
And so is that really going to easily shift everyone’s behavior to now they’re holding stablecoins and buying their coffee directly paying with a stablecoin or with a CBDC? And so it’s important to unpack and look at what are the actual problems that they can solve. What are the properties they have, and what are some of the use case? And when we look at the use cases for stablecoins, right now, I think increasingly, where they’re growing, there are a lot of use cases that are more B2B — that are large value transactions.
I think last time I looked like the average value of a stable coin transaction is over $10,000. Like this is not a consumer-facing thing. Everyday consumers are just not holding stablecoins and using them to buy their coffee. This is a payment rail that sophisticated businesses are using for global treasury operations. It’s a very different thing. And it’s solving that problem pretty well in terms of the demand in what we’re seeing in the market. And that’s a use case that we think there’s significant potential for.
And so even for Visa, a lot of people think about Visa as a retail payments company. Our goal is to really say, how do we add value to all different types of transactions? And there’s actually there’s something like a hundred trillion of B2B payment flows that are happening in wire transfers and checks, that aren’t really digitized, that aren’t fast, that aren’t efficient.
And so if we can have a new payment rail that can be programmable, that can be more accessible, that works 24/7, that can enable cross border transfers. That can be really powerful for the next class of emerging small businesses and high growth technology companies to be able to be more efficient in their treasury operations. And that’s like the use case that we think stablecoins are solving today, both for crypto capital markets, having more efficient 24/7 trade settlement, as well as B2B, which I think are very different use cases than what a lot of the policy conversation is around focused on just consumers that would potentially hold or use it to buy their coffee. And so I think that’s the first point.
And then I think the second is, what are the ways that stablecoins could potentially help consumers? And I think there’s not really enough of that conversation happening. And one of the first use cases that we’re seeing are things like payroll. Increasingly, in the crypto ecosystem, there are a growing number of companies that are paying their employees in USDC. And so one of them, I think you’ve had the Delphi Digital team on, I think they tweeted the other day that they have engineers that they are streaming payroll to paying by the second in USDC.
And so this is early, this is experimental, but if you just stop and think about that use case, and say that today payroll tends to happen every two weeks, or maybe twice a month and in some places, maybe once a month. And why is that the case? Well part of it is that’s just how it’s always been done. That’s what the business processes are. And part of it is the payment rails that payroll runs over have been around for decades and they’re not really optimized to pay someone by the second. It’s just not something you could really do.
And so now what stablecoins and public blockchains represent, are a set of technologies and new payment rails where it is now technically possible to pay employees by the second. And so if you take a step back and you say, how do we leverage stablecoins to actually solve consumer problems? And that can actually improve people’s lives, and could help with financial inclusion, can help with economic inequality issues. And we think about payroll as the concept of living paycheck to paycheck, just the term, it existed when there were physical checks and it still exists when there’s ACH or wires.
And so if we can help make new technologies that could have the potential, still a lot of things that need to be built, there need to be controls, there need to be risks. But if that’s something that we can do to improve how quickly people who need the money can get paid, that’s solving a real problem. And so we think that there are a number of use cases that are not consumers just holding this forever instead of an FDIC insured account, or not consumers just buying their coffee, that should be a part of the conversation. And there are real benefits in their real use cases in case studies that are happening today.
Wow. I was going to next switch the topic and ask you about NFTs, but I also was going to touch on diversity issues. And so I think I’ll do that first and ask you about some comments that acting comptroller of the currency, Michael Hsu, mentioned in a recent speech, where he said that a survey showed that 10% of the fully banked say they own crypto. 12% of the unbanked say they do. And 37% of the underbanked say that they own it. And then he said that for whites, 13% own it, blacks 18%, and Hispanics 20%.
So now, the funny thing is, that after I read just that portion of his speech, I thought, oh wow, the banks really aren’t serving those populations well and so they’re turning to crypto. But then his conclusion after that was,“to the extent that there is fools gold in the crypto space, some of those who are going to be hurt most are going to be those least able to bear it.” And I felt that that kind of maybe his view was more focused on fraud in crypto rather than any legitimate use. And I know you’re very vocal, and you sort of touched on this briefly, about the use of crypto for diversity and inclusion. So I was curious for what your views are on this topic.
Lots of thoughts on the topic. To start, there is a conversation around financial inclusion that is incredibly important. And there are a number of examples like payroll and other things that you can talk about. But I think what’s important is that it can really evolve to a conversation around financial empowerment. One of the things that makes crypto really unique is that it simultaneously exists as this new technology, that is fundamentally real breakthrough technical innovations that are happening. It’s hard to argue that that’s not the case.
It’s a new industry where every crypto company I know is hiring as much as they possibly can. And we’re seeing growth in terms of a platform for innovation and entrepreneurship that new companies are being formed. And there’s a lot that we can talk about around just that as an opportunity for entrepreneurs.
And then it’s a new asset class. And one that you could argue is more accessible than most other asset classes have been. And so it kind of exists at the intersection of those three things, which we think is really unique. There are opportunities for crypto to drive financial empowerment. I would argue sometimes even bigger opportunity than just financial inclusion.
So it’s not just, how do you give someone a bank account? How do you actually help people build wealth? And you kind of have to take a step all the way back and start with, before you even gets to financial inclusion, financial empowerment, there’s financial education and literacy. And one of my favorite things about crypto and what I would say it’s done for me personally, is that I’d argue that crypto is a growth hack for financial literacy.
Try and sit down and talk to a teenager and say, let me give you a lecture about inflation. Let me explain to you what inflation is, what it means for your portfolio, and how you should think about saving versus investing, and how you should allocate your funds. Hard to get a lot of interests there.
Versus sit a teenager down and say let me tell you about Bitcoin, and what is Bitcoin, and how it works. And through explaining what Bitcoin is, you have an entire generation of consumers who are now learning core concepts around money and investing. And so it’s not that crypto is the solution. And like, everything is like, they should just only care about crypto, but crypto can be a way to draw people in. To get people interested in investing and to then teach really important concepts that can help people build wealth over time. And I would argue that when you just look at financial literacy, the curriculum for financial literacy needs to consistently and constantly evolve and be updated.
And so if you ask them about financial literacy a few decades ago, it’s how to balance a checkbook. What a certificate of deposit is. That would be the curriculum. And today, that’s not as relevant. I’ve never balanced a checkbook. I don’t think I’ve written a check. I don’t know if I’ve actually ever written a check.
So you can’t just go with, all right, financial literacy is one thing and then crypto is over here. I think increasingly people want to have opportunities to understand how they can build wealth. There needs to be consumer protection, but part of that starts with education. How can you get more people interested in the concept of investing? And it’s no longer just enough to teach saving and to say that you should save some money every month. If inflation exists, and someone is saving and we have all-time low interest rates, racial wealth disparities get bigger and bigger if someone saving and someone else is investing.
And so I think that it’s really important that we have more of a comprehensive discussion around financial education, and around how to teach investing, and how to get people interested in investing, and not just teach them to invest in crypto, nothing else. But if crypto can be this exciting new thing that can spark the interest in why to invest. And if spending on a Visa debit card and earning Bitcoin back becomes the first financial asset that someone owns before they’ve made any other investment in their life, there are a lot of really positive elements by which you can bring them into, not just the payment system, but you can bring them into opportunities to participate in investing in growing wealth themselves. And so I think financial literacy and education is an enormous opportunity and something that we care very deeply about and we’re working on a number of initiatives around.
And I think that also leads to new products that can be built that can help with financial inclusion, getting people paid faster and then new opportunities for retail investors to access new asset classes. I care personally just very, very deeply about racial wealth disparities. It’s something that I’ve been aware of for a long time within my own family and my own life, like from a very early age.
One of the things that has been frustrating to me is it’s very easy to point to some of the root causes. Things like redlining. And if black families weren’t able to purchase real estate in the bay area for decades, it’s pretty hard to make up on decades of appreciation in gains on a home that you purchased in Palo Alto in the sixties.
And you can diagnose those causes and some of the challenges, but how do we think about what are the solutions? And I think increasingly, the solutions have to be future thinking and future-looking and based upon new technologies and new asset classes, and it can’t just be, oh, now we have to help more black people buy homes. That’s part of it, but just buying a home alone is not enough. And so I think crypto is not the answer, but crypto should be part of the conversation around financial literacy, financial inclusion, financial empowerment. And in fact, it can start the conversation, which I would argue is a huge, huge opportunity.
And so this is kind of like a related subject, it’s maybe slightly different, but I was noticing that one of the new hires that you made on the crypto team at Visa was for a Head of Crypto Strategy of Emerging Markets. And I wondered, if you at Visa, noticed different financial behaviors in emerging markets. And if so, how that impacts your strategy as Head of Crypto or for, for this person as Head of Crypto Strategy for Emerging Markets. And what new behaviors or different behaviors you’re noticing in those markets, especially for the unbanked and underbanked.
Crypto is global and the interest in it is continuing to grow in most markets across the world. I think what’s unique about emerging markets is that any place where there haven’t been as many opportunities to build financial products. If you think about FinTech, particularly FinTech in the United States, a entrepreneur has many different platforms, many different tools, many different things, where they could build a new neobank or financial product. Entrepreneurs in many emerging markets don’t have those same tools and those same platforms that lower the barrier to entry to actually build new financial products.
And I think one of the most powerful things crypto can do is provide that financial infrastructure and lower the barrier to entry to build new products. And it will lead to many more products emerging, which I think is ultimately great for consumers and great for competition.
The fact that if you wanted to build a product where a consumer could hold value, let’s say, hold value in dollars, send or receive value in dollars. So something that say looks like Venmo, that is something that would be very, very difficult to build in most emerging markets, on top of the existing financial infrastructure. That would require getting one of the largest banks in those markets to partner directly with you as a startup. And then even they have to figure out how to get access to dollars. Like it’s not an easy thing to do.
Now, what we’re seeing is that there is this rapidly growing global developer ecosystem of really talented engineers all across the world that are now enabled to build new financial products. And they’re building, on a weekend at a hackathon, a mobile wallet that looks and feels like Venmo, but it happens to be on top of USDC.
And so the barrier to entry and the pace of innovation that can happen in these markets where there’s just a clear demand and opportunity to create better financial products, I see crypto as a major enabler for those entrepreneurs to build on top of.
For Visa, increasingly the customers for developed for payments are developers. And so we want to follow developers where they’re going and what they’re building and how can we help enable them. And so we’ve spent a lot of time with fintechs and banking as a service platforms in the United States and in Europe. And now the equivalent are likely to be public blockchains and stablecoins and DeFi and these other new pieces of infrastructure that are global on day one and exist everywhere.
And so we see the opportunity of how do we help entrepreneurs in those markets build on top of them, and then be able to connect the products they build to the existing payment rails and payments ecosystem, and have better fiat on-ramps and off-ramps. And so we think there’s a huge opportunity. We’re spending a lot of time there, and we’re really excited to see how we can help the entrepreneurs that are building.
So now we will transition to NFTs, but still discuss diversity and inclusion a little bit. You’ve talked about how you think crypto art can help black artists in particular, what problems do you see it solving for that group?
My favorite topic. NFTs are absolutely fascinating. I guess first, the way that we’ve thought about them, like, what are NFTs, like, what do they represent? It really speaks to how much of a general-purpose technology that crypto and public blockchains have become. Where crypto started as the ability to create this new asset class or these new assets like Bitcoin. Then crypto evolved to become really a new form factor for existing currencies like the dollar with stablecoins, which are really crypto dollars. Now, crypto is becoming really a new form factor for digital media. for audio, for videos, for images, and that component of PDFs.
I forget who explained this as NFTs are like this file type format on a blockchain computer. And it has these properties that are incredibly powerful for the creators of the underlying files and the underlying content. If you create music, if you create art, if you create videos, like now there’s a new file type that can help you distribute that and help you monetize that.
And I think there are so many parallels to e-commerce, and so many ways that NFTs can extend many of the benefits of e-commerce. So if you think about what e-commerce enabled, you can now set up a merchant, a store, and sell to consumers all across the world. And you can do that easily in an afternoon through a no-code platform like Shopify. It’s incredible. It used to be, if you wanted to become a merchant, and you wanted to open a store, well good luck finding space, you got to put a deposit down, then you got to pay rent. You have to have a storefront. Like there are all these things you have to do.
Now, you can open your laptop and you can create a Shopify store. It lowered the barrier to entry for entrepreneurs and individuals to become merchants, which we think is fantastic for growing global GDP and just helping to improve the world. But the challenge was, you had to produce and sell physical products, and that’s pretty tough. And that still has a pretty high upfront cost and barrier to entry.
Now you got to figure out, okay, you could design that product digitally, but who’s going to manufacture it for you. Are you gonna find the right factory in China or in another country and figure out, okay, how do you get in touch with that factory? You know, how can they actually build it the right way as you want? Then you have to have it shipped. You have to have a fulfillment center. And then the pricing is dependent upon the shipping. So you can’t really sell a $5 physical good to someone who lives across the world if it’s going to cost $10 to ship it there.
And so, even though we’ve gone to this world of digital commerce and e-commerce, we can sell online, we’re still very much constrained by physical goods that people are selling, and we’re constrained by both what people can sell and how many things people can can buy.
What NFTs are doing, is they’re creating the opportunity for people to become a merchant and to engage in digital commerce, just with their creative talent. The ability to manufacture or produce a digital product, a digital good, enables anyone who’s creative and has an idea, can now have a storefront and can now sell a digital good and participate in digital commerce.
And we think that that can lower the barrier to entry significantly, because you can go to, in an NFT platform like OpenSea, and you can mint what a photograph, a piece of art, or a song, sure there are gas fees. I think there’s some ways you can do gasless minting now, for such a fraction of the cost of anyone creating a physical product it’s. So we think that for the creator economy, being able to move from advertising-based business models to commerce based business models, and not let me set up a merch store, but find a factory to produce t-shirts, but actually being able to sell your core product, your core content, is incredible, and can enable so many people who have produced significant value in their content, but haven’t really been able to capture that value.
Now, they can engage in commerce, and they can sell that content in a way that people can collect. And we think that that is incredibly powerful. And when we look at like, how is this happening today? How are people using it? You know, we’re seeing that there are diverse artists all across the world that now no longer have to get into physical galleries, but can actually sell their work directly to consumers online. And I think the traditional art industry has had many gatekeepers, a number of historical areas, if you can’t get listed in an auction, like how are people going to discover and buy it from you?
And now, if you can leverage the distribution that you have on social media, on large global platforms, with the ability to sell directly to them, and participate in commerce, that can enable creators all across the world to not just make a living, but really thrive and build significant value, which they’ve been creating the value. Now is the first opportunity to can really capture.
Yeah. it’s been fascinating watching Visa not only get into crypto, but then also Visa bought crypto punk 7610. And it also released a whitepaper to help businesses understand how they can integrate NFTs into their work and also how Visa could help with that. And so I was curious kind of what you see as the vision for businesses with NFTs and in particular also how it fits in with Visa’s business and why Visa bought this CryptoPunk.
We think there’s a huge opportunity for merchants and brands, to leverage these new technologies to grow their businesses and grow digital commerce. And again, I think it’s really useful to compare it to the early days of the internet and to e-commerce, where you had brick and mortar merchants who saw the internet coming, and they were like, how do we sell online? Like that can increase the reach of our brand and that can enable fundamentally new business models.
Visa spent a of time figuring out, like how do we make it secure and easy to sell things online? And it wasn’t a given you can do that. There was a time when people are like, what you’re going to put a card number into the internet, like, isn’t that terrible?
And so you had both brick and mortar merchants have to figure out how to sell online. And then you had a new class of e-commerce native merchants who emerged, like the Amazons of the world, with new business models, new products that were facilitated by the fact that you could sell online. Now in the 2020s, you have this similar dynamic, where you have e-commerce merchants, who now want to figure out how to sell on-chain, where they’re looking at all of the commerce that’s happening on platforms like OpenSea and the excitement and demand from collectors. And they’re like, how do we sell digital goods now in the form of NFTs? And then you have a new class of crypto native and NFT native merchants, whether marketplaces like OpenSea or gaming platforms that are just building enormous new businesses selling on-chain.
So ultimately we see Visa’s role as, as again, being the bridge. The same way that we have really started to establish our role as a bridge between crypto companies and crypto wallets and our 70 million merchants, the same way that we’ve started to become a bridge between banks and the crypto ecosystem. We think we can help become a bridge between merchants and the NFT ecosystem.
And there’s a lot of value we can provide as we learn about the underlying infrastructure in the technologies and the business models to help merchants and brands be successful selling on-chain. And so that’s why we really started to follow this space very closely, try and understand it. And we were writing the whit paper and we’re like, how do we just participate in this? And you learn by doing and experimenting.
So you’re like, why don’t we buy a CryptoPunk? And it actually made sense when you understand the history of Visa. Visa has been around for over 60 years. We have an archive and we have historical artifacts that we’ve collected for decades. We have early cuff links from in the formation of Visa, we have these old, like zip zap machines, those are the first point of sale terminals that people use to accept cards. And so we’ve been collecting and displaying in our offices, these commerce artifacts.
We saw CryptoPunks and kind of the role that they played as being one of the first NFTs to really go mainstream and get to this point of just historical significance in being incredibly coveted and successful as this bridge between culture and art and technology.
And so as a way to celebrate the past, and the present, and the future of commerce, we thought it made a lot of sense to a crypto punk to our collection. And we thought we could learn a lot through it. We worked with our partner Anchorage to figure out. Like, okay, what does it mean to custody an NFT? How do you actually execute a transaction? And so it was really fun. And I think it was a great experience. And it’s part of what we’re trying to do, is really build a crypto native culture inside of Visa. And we believe very strongly in building and experimenting and learning in public. If we can build and learn and become experts, we can then help our clients across the world be able to understand and become experts.
And I think that the same way that if you never got a dial-up internet connection in the nineties, and I remember the moment that we got our dial-up internet connection, and you never logged on and surfed the web, it was very hard to tell what impact would the internet have on society, on your business, on all of these different things.
We think it’s similar to crypto. For anyone out there, whether you’re a merchant or a business, or really anyone, if you have never downloaded a non-custodial crypto wallet, and you’ve never interacted directly with a public blockchain network, you’ve never minted an NFT, you’ve never collected an NFT. It is impossible to understand the potential implications and what this technology can do as well as all the problems that need to be solved and like how far we are and how early we are in solutions that that need to be enabled.
And so that’s something that we encourage our clients. We encourage everyone that we talk to. And we take very seriously internally, where our crypto team and folks inside Visa broadly, we use crypto on a regular basis, because we think it’s the only way that we can really learn and stay up to speed with the implications that it could have. And so purchasing a CryptoPunk is a great example of how using crypto in participating in the ecosystem, honoring the role that CryptoPunks have played in the communities of collectors around it, made a lot of sense for us, as something for us to do.
I love it. It’s super interesting. It has been so fun having you on Unchained. I have just loved this conversation. Where can people learn more about you and also Visa’s crypto work?
Sure. So you could go to visa.com/crypto. I’m personally on Twitter @cuysheffield.
Perfect. All right, well, thank you so much for coming on Unchained.
Thanks for having me.
Thanks so much for joining us today. To learn more about Cut and Visa, check out the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yoon, Daniel Nuss, and Mark Murdock. Thanks for listening.