Visa Partners With ConsenSys to Build CBDC Technology

Today, January 13, 2022, Visa announced a partnership with ConsenSys – a blockchain technology solutions firm – to aid in the design of future Central Bank Digital Currencies, or CBDCs. With CBDCs popping up all around the world, it seems as if it is just a matter of time before we will see the deployment of CBDC counterparts for many of the world’s predominant fiat currencies sooner than later. In this piece, we will discuss CBDCs, and how Visa’s partnership with ConsenSys is aiming to accelerate this new variety of currency.

What are CBDCs

Central Bank Digital Currencies are digital equivalents to fiat currencies. They can be exchanged at a 1:1 ratio for the fiat currency of their respective country. A country’s fiat currency and CBDC share the same value at any given time.

At the surface level, CBDCs appear to be very similar to fiat-backed stablecoins, but there are some key differences. Fiat-backed stablecoins can only be minted when the issuing authority has the equivalent amount of the fiat currency the stablecoin represents held in assets. a stablecoin issuing authority – such as Tether – needs to be able to prove that the assets that they are holding have to be worth more than, or equal to the amount of value that is being represented in USDT tokens.

CBDCs on the other hand, are controlled by the central banks of their respective countries. With almost no effort, the central bank can increase or decrease the amount of CBDC coins that are in circulation, which directly effects the inflation or deflation of its respective currency. Furthermore, with CBDCs, there is no need for fiat currencies to be kept in a bank.

Although most of us in crypto don’t have high opinions of banks, they are in many ways a necessary evil in the current fiat system. Even though banks hold most of the fiat currency that is being circulated, it still belongs to the person responsible for the account. If one was so inclined, they could withdraw all of their fiat currency out of their account as bank notes and stash them under their mattress. With CBDCs, this is impossible.

This is because CBDCs exist on one central database, that is solely controlled by the central bank. If the central bank was so inclined, they could freeze accounts, track payments, and even deny transactions between specific entities or individuals. Now of course, each government that is either working on, or has released a CBDC project has vowed to never use CBDC as a means to spy on, or interfere with peoples’ lives, but historically speaking, it is unsettling to give that much immediate control to one governing body.

CBDCs vs. Crypto

CBDCs are technologically like cryptocurrencies. The big difference between CBDCs and cryptocurrencies is that CBDCs are centralized, and controlled by the government, while cryptocurrencies are decentralized; meaning they are owned and controlled by the entire community of individuals who participate in the network. Cryptocurrencies can’t be manipulated by governments, or any other single entity, with the flick of the wrist. This is why it is so important that we have cryptocurrencies to use as a store of value, and system of transaction, given the way the world – and its governments – inevitably change over time.

Visa and ConsenSys

Visa has and Consensus are working together to build what they are referring to as an “on ramp” or sandbox to mint CBDCs. They will be using the Quorum protocol: a protocol designed by ConcenSys. Although this new rollout of CBDCs is not expected to take place until the spring, it is evident that CBDCs are growing in popularity at a greater rate than ever.

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