Visa's Move into Digital Tokens: Revolutionizing Asset Tokenization by 2025

[TL; DR]

Visa has launched its VTAP technology that enables banks to develop fiat-backed stablecoins they can use to facilitate financial transactions.

Banco Bilbao Vizcaya Argentaria (BBVA) and Visa have partnered to develop and test the VTAP technology.

In 2025 more banks will be able to collaborate with Visa to test its financial products.

Introduction

Partnerships and cooperation are key aspects of the blockchain sector since they enable crypto firms to provide the best digital services to their users. Time for crypto projects to work in isolation seems to be over as they need to enhance their capabilities and resilience. For example, crypto firms should cooperate to provide high security. This analysis looks at VISA’s move into the digital sector and the potential partnerships it will forge to succeed.

VISA Ventures into the RWA Sector

Recently, VISA communicated its intention to venture into the real-world tokenization sector through its financial products. In partnership with different financial institutions Visa will use real-world tokenized assets (RWAs) to improve the capacities of various financial institutions such as banks. Its product, the Visa Tokenized Asset Platform (VTAP) will help to bridge the gap between traditional finance (TradFi) and the blockchain sector. It will unveil its product on a wide-scale pilot project in 2025.

At the moment, the VISA VTAP is accessible on its Developer Platform which enables its affiliated partners to develop and test their digital assets such as the Central Bank Digital Currencies (CBDCs) and other stablecoins. Currently, the project is within the Sandbox environment. Basically, the VTAP will help financial institutions to integrate the blockchain system into their traditional financial operations. This will improve the services of the financial systems and make their business operations efficient and easily accessible to many people. When it rolls out the project, it will have more than 15,000 partners in over 200 countries.

Apart from minting stablecoins VTAP is designed to offer financial institutions an end-to-end infrastructure for securely performing digital transactions such as transferring Visa digital tokens. The financial service will be available on both private and public blockchains, making it accessible to as many partners as possible. Basically, banks will be able to mint their stablecoins and use them to facilitate fast transactions across the Visa blockchain ecosystem and banking facilities. Thus, this system will help financial institutions to automate their current workflows as well as enable the frictionless movement of real-world assets within the Visa global financial system. Through this digital finance transformation banks will be able to settle payments in real-time, something which is not possible if they only depend on their traditional payments systems. it will become secure and convenient to make conditional payments such as periodic deductions.

Another important aspect is that financial institutions will be able to use the decentralized finance technology without infringing on their regulatory obligations. Similarly, they will not compromise their security measures, making the use of asset tokenization applicable to the sector.

With its current focus, Visa will likely transform the global financial system thereby enhancing transparency, speedy transactions and reliable financial solutions. Regarding this, Vanessa Colella, Global Head of Innovation and Digital Partnerships, Visa said, “Visa has been at the forefront of digital payments for nearly sixty years, and with the introduction of VTAP, we are once again setting the pace for the industry. We're excited to leverage our experience with tokenization to help banks integrate blockchain technologies into their operations.”

Asset Tokenization a Game Changer in the Global Financial Sector

As said, VTAP will likely revolutionize the global financial system using blockchain technology within the next few years. This is because the digital token platform will enable banks to bring fiat-currencies onchain in a secure, efficient and seamless manner. This financial innovation comes with various benefits which include the following.

Integration: Using the VTAP platform financial institutions will be able to process transactions using fiat-backed tokens, in the form of stablecoins. Apart from minting stablecoins banks will be able to burn them depending on their demand.

Programmability: The banks can automate various transactions since they will use smart contracts. For instance, they can use the system to administer their credit facilities. Also, their customers will be able to use fiat-backed stablecoins to buy tokenized treasuries and commodities. As a result, it will become easier for individuals to invest in various investment instruments.

Interoperability: One of the good things is that the digital asset issuance can take place on different blockchains which creates a truly tokenized economy. What this means is that the tokens can be transacted among the different blockchains which enhances interoperability. Therefore, in the future a bank operating under the Visa blockchain projects will need a single API to benefit from the multiple use cases of asset tokenization. With that, it can interact with various blockchains and other financial partners. Thus, the VTAP system is designed to facilitate secure cross-chain transactions of tokenized real-world assets (RWAs) using fiat-backed digital assets.

Visa’s Vision: How Achievable is it?

In summary, Visa’s vision is to promote interoperability among blockchains that support the existing fiat currency system. It will achieve this by integrating its current technology with the blockchain technology in a convenient manner. Interoperability plays an important role in promoting the transfer and utility of tokenized real-world assets, being treasuries commodities or other financial products. This also means that some financial institutions will be able to bring fiat currencies onchain so that they are used in decentralized finance (DeFi) applications.

Whereas Visa is currently working with a single partner BBVA in 2025 it will increase the number of partners that will participate in the pilot program. Also, during that period various financial institutions will work with Visa to develop capabilities and standards that will promote the new payment system to operate in a compliant, secure and reliable manner. Therefore, the Visa 2025 vision entails launching the VTAP financial product. In all, the Visa’s digital finance transformation program will likely lead to greater crypto adoption in coming years than at present.

Visa’s Strategic Partnerships to Enhance Tokenized Digital Asset Adoption

Both Banco Bilbao Vizcaya Argentaria (BBVA) and Visa have confirmed that they have entered a partnership aimed at developing and testing the VTAP technology. Already, BBVA has been involved in the testing of Visa’s VTAP. More significantly, it will continue to do so as Visa waits for other bank partnerships earmarked for 2025. Some of the tests which BBVA is conducting include digital asset issuance, transfer of the tokens as well as redemption on a testnet blockchain.

Posting on its blog, BBVA said, “BBVA is one of the first banks in Visa's global network to use VTAP, a new Visa platform that enables financial institutions to create and manage digital tokens backed by fiat currencies such as the euro and the dollar. BBVA will use VTAP to create tokens on the public Ethereum blockchain with expected live pilots in 2025.”

More specifically, Francisco Maroto, Head of Blockchain and Digital Assets (BBVA) said, “We are proud to continue spearheading the exploration of tokenized solutions with Visa through its VTAP platform. This collaboration marks a significant milestone in our exploration of the potential of blockchain technology and will ultimately help enable us to broaden our banking services and expand the market with new financial solutions.”

Conclusion

Visa intends to revolutionize the financial sector through developing a system for tokenizing and using real-world assets, especially stablecoins. With this system banks will be able to develop their fiat backed tokens which they will use to facilitate the transfer of value among the partners. Currently, Visa has partnered with BBVA to develop and test their technology, with the hope of launching it in 2025.