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Despite the markets "crypto winter", the giants of the payments industry continue to advance their pawns on the global cryptopayments chessboard: JP Morgan, Visa, Mastercard, Swift and even Mc Donalds and Google, have recently taken strong positions to reach the center of this chessboard. On the kingside, Bitcoin continues to strengthen its position, hash power and evolution as a means of payment. With Lightning it reached a new historic high!
In this article, I offer you an overview of these latest advances in cryptopayments.
📺 For a video version of the article click here on Valuechain Youtube channel (in French)
VISA TO LAUNCH CRYPTOPAYMENT CARD IN 40 COUNTRIES
Let's start with the payment giants, the payment card schemes. Visa has accumulated more than 70 partnerships with crypto companies, testifying to its ongoing transformation from a payment player to also become a leader in cryptopayments. Visa recently announced a collaboration with the crypto exchange FTX, to allow crypto holders to be able to pay with their cryptocurrency at points of sale with several million merchants in 40 countries around the world!
FTX and Visa have prioritized Latin America, Asia and Europe. Visa believes that crypto-asset investors would continue to spend their cryptocurrencies during market downturns to profit from their gains during upswings. FTX said:
"The next phase of FTX-branded Visa card rollout is expected in Europe before the end of the year, with additional regional launches planned for 2023."
The move allows customers to spend cryptocurrency without withdrawing it from the exchange prior to payment, "like you would with any bank account," as Visa's chief financial officer explains.
As a reminder, the founder of FTX is Sam Bankman-Fried also known by his initials SBF, is an American entrepreneur, billionaire and investor and his exchange has more than one million users. His estimated net worth is $10.5 billion.
The FTX and Visa collaboration makes it easier for merchants to accept cryptocurrency without having to invest in proprietary acceptance system infrastructure.
At Valuechain, we believe that these approaches to accepting cryptopayments are only transitional before POS themselves are modernized and become crypto-native by design, such as Lightning Network payments in Bitcoin. Contact Valuechain for more information on this.
JPMORGAN & VISA
Visa has even partnered with the world's largest merchant bank J.P. Morgan to improve cross-border payments using their private blockchain networks called, Liink and B2B Connect. Liink, is offered by Onyx, the crypto-payment division of J.P. Morgan and launched in 2017. It relies on the Swift network for the coordination of correspondent banks to ensure that participants in a transaction provide authentic identities and correct information.
Payment failures cost the global economy $118 billion a year; 66% of them are caused by incorrect account information, according to J.P. Morgan. Confirm soon plans to connect 3,500 banks and 2 billion accounts guaranteeing a better success rate and a reduction in fraud.
Visa's cross-border payments product for financial institutions and business customers, B2B Connect, has adopted Confirm to validate account information. J.P. Morgan today announced that Deutsche Bank is joining as a founding member of the Confirm product to guide its strategic expansion!
MASTERCARD AND CRYPTO COMPLIANCE
Visa's competitor, Mastercard has taken a different strategy to catch up, they are positioning themselves as a key global player in crypto transaction compliance and are in direct competition with players like Chainalysis, Scorechain or Elliptic.
Mastercard has announced that it is working on new software called Crypto Secure based on CypherTrace technologies acquired last year. The solution is based on data from public blockchains, public registers (from exchanges for example) as well as sophisticated artificial intelligence algorithms.
Presumably Mastercard monetizes (illegally?) its knowledge of personal payment data by training these AI models. This will help crypto-asset service providers to better perform their enhanced due diligence and report suspicious transactions to government authorities (like TRACFIN in France).
Illicit cryptopayment transactions reached an estimated $14 billion last year according to Chainalysis and the market for combating such transactions is a strategic playground for card payment processors.
Compliance in the crypto space is a key success factor for startups given the upcoming and in place regulations. Valuechain specializes in advising several companies and crypto exchanges in France and Europe in their internal audits and compliance.
SWIFT
The Swift network, which operates payments at a different level from Visa or Mastercard, connects more than 11,000 banks. It tested a solution for exchanging different central bank digital currencies (multi-MNBC) and bridging with traditional circuits.
It reminds us of the Donbar project that we already covered in a previous Valuechain video.
14 central and commercial banks, including Banque de France, Deutsche Bundesbank, HSBC, Intesa Sanpaolo, NatWest, SMBC, Standard Chartered, UBS and Wells Fargo, are experimenting with Swift in a test environment to accelerate large-scale deployment in preparation of the Euro Digitale and are interoperable with other MNBCs such as the digital dollar, etc.
This approach is to be balanced because it is a use case for cross-border payments and it assumes the issuance of CBDC D€, D$ etc. then to make them available in multi-CBDC outside their borders which is not guaranteed to date according to the ongoing reflections of the ECB for a retail Digital Euro and not wholesale and cross-border.
This announcement, however, clearly explains the payments giants' active adoption of Distributed Ledger Technology. And according to our study of the French market, French banks are still lagging behind and need training, impact studies and opportunities in this area and this is exactly what Valuechain provides as consulting for them. If you are in this field do not hesitate to contact us to study the opportunities of the blockchain for your trades.
MCDONALDS ACCEPTS CRYPTOPAYMENTS
McDonald's has started accepting Bitcoin (BTC) and Tether as a form of payment in the city of Lugano, which has a population of 63,000, in Switzerland. On October 3, Bitcoin Magazine posted a one-minute video on Twitter showing buying meals at McDonald's digital kiosk and then paying with Bitcoin at the traditional register using a mobile app.
The Swiss village launched its “Plan B” operation in March. This project consists of creating a hub on the topic of cryptocurrency. Lugano residents will now be able to pay their taxes, make payment for parking tickets, utilities and student tuition using Bitcoin and approved stablecoins such as Tether and CHF.
More than 200 local shops and businesses are also expected to accept cryptocurrency payments for goods and services, as merchants will benefit from instant conversion into local fiat currency with the help of various service providers.
One of the main solutions used by the City of Lugano comes with the help of Lightning Network (Layer 2), which has evolved into a leading, highly scalable and resilient payment system that overcomes upgrade challenges of blockchain scaling without sacrificing security, reliability or anonymity.
We can see strong adoption of the Lightning Network forming and we'll come back on that later in this article. The strategy in Switzerland also includes the creation of two investment funds. The first fund, worth $3 million, aims to encourage acceptance of BTC across the city. The second tranche of $110 million is intended for the creation of companies seeking to launch in the Swiss city. All with the aim of becoming one of the leading bitcoin cities in Europe.
GOOGLE & COINBASE
Google has announced that it will soon accept cryptocurrency payments for its cloud services. A deal with Coinbase will allow Google customers to pay for cloud computing services using Bitcoin (BTC). It is even considering cryptocurrency storage and exchanges with Coinbase
"This integration will allow developers to leverage Web3 services without the need for expensive and complex infrastructure"
Alphabet, the parent company of Google, is increasing its investments in blockchain startups like Visa: its shares rank it as the first crypto startup investment fund: $1.5 billion between September 2021 and June 2022.
BITCOIN MORE POWERFUL AND MORE SPEED
The king of cryptocurrencies, seems to not recognize a crypto winter. Its hash power defies any negative market indicator. Bitcoin's proof of work hit an all-time high after falling sharply following the crash. Its hash has jumped by more than 30% in 2 months, exceeding 265 Exa-hash/second. To understand the meaning of this indispensable power, I recommend the Valuechain video "Almighty Bitcoin" (in French)
I remind you of my theory on this matter. Mining is a main fundamental of Bitcoin's value. Bitcoin is tamper-proof digital energy due to the need for real energy to forge it. I hope to develop the value-energy relation with you in a separate study.
But let's now look at a 2nd fundamental of Bitcoin, its circulation. The new information that gives us a very positive signes comes from Lightning Network. BITCOIN: THE LIGHTNING NETWORK REACHES $100 MILLION IN BTC. This Bitcoin layer 2 solution proves to be a more elegant solution than Ethereum's Merge and shardning. Notably thanks to the low cost and high speed of its BTC exchanges. This so-called “lightning” network has seen strong growing adoption. It has just reached a symbolic number of 5000 bitcoins in its pre-paid channels, i.e. more than $100 million.
To explain the importance of this event, you must remember that the valuation had reached more than $200 million before the fall in price with ~3000 BTC. Despite the crypto winter, nothing seems to stop the bitcoin flash that added another 2000 BTC in record time.
CONCLUSION
I hope this panorama has proven to you that the flame of the blockchain revolution remains alive despite the crypto winter of the markets. and you will have noticed that the spark of Bitcoin turns into a lightning bolt that moves giants who want to join the game of cryptopayments