Visa’s blockchain-based innovations can take small businesses to the next level

Visa and partners developed a programmable finance platform that allows farmers to securely finance and sell their crops by leveraging blockchain technology

SAN FRANCISCO, May 9, 2023–(BUSINESS WIRE)–Visa (NYSE: V), a global leader in digital payments, was one of nine finalists tasked with exploring innovative blockchain-based use cases for True digital (Brazil’s central bank-issued digital currency, or CBDC) as part of the latest LIFT Challenge. The company partnered with Agrotoken, Microsoft and Sinqia to develop the filing.

After months of collaboration between each company’s world-class researchers and engineers, Visa and the team are excited to share the results of their LIFT Challenge participation – a programmable finance platform for small and medium-sized enterprises (SMEs), particularly farmers, that is designed to enable greater access to global capital markets, facilitate interoperability between currencies, improve operational processes and uncover new growth opportunities.

Small businesses drive global economies

SMEs often rely on localized market structure when negotiating favorable contracts. For example, factoring is a well-known financing method today where a farmer can sell his future receivables at a discount to receive money today to buy supplies and pay wages. This process routinely leads to a significant percentage loss of the farmer’s claim to the entity that provides financing.

Visa’s prototype is designed to give local farmers more timely and greater access to a global pool of investors for funding, allowing SMEs to get the best price discovery for their goods. By giving SMEs more options to finance their businesses in a secure and frictionless way, Visa’s prototype platform aims to improve existing money movement operations and alleviate pain points caused by the unavailability of traditional services.

“Small businesses are important contributors to our local economies, for example in Brazil, where they employ over half of the population and contribute to almost a third of the country’s GDP. At Visa, we are committed to helping them grow, and exploring new technologies that will empower them to more easily maintain and expand their business operations,” said Catherine Gu, Global Head of CBDC for Visa.

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“Brazil is one of the world’s leading markets for innovation,” she continues. “By contributing our expertise, scale, network and cutting-edge technologies in this market, we are able to help advance real-world applications of digital currencies – in this case, enabling a soybean to create and globally auction a tokenized contract on a permissioned version of the Ethereum blockchain, while using different forms of money and interoperating between them.”

How Visa can enable programmable finance in CBDCs

With many of the world’s central banks exploring the value of a central bank digital currency (CBDC), Visa and its partners have demonstrated how CBDCs can enable new cross-border payments programmatically, as well as provide international investment resources to SMEs. The programmable aspects of digital currencies, which allow the delivery and payment of assets and currencies to be settled automatically only when certain conditions are met, opens the door to more efficient use of capital and reduced counterparty risks, while providing the safety, stability and security of a central bank commitment via CBDC as a reliable settlement currency.

The prototype platform brings existing financial processes and assets on-chain, allowing farmers to tokenize traditional financing contracts. To achieve this, Agrotoken drew on its agriculture-based tokenization expertise from their existing solutions in Brazil and Latin America, and Visa provided a tokenization process to turn existing Brazilian legal documents into a tradable on-chain NFT.

“Agrotoken is on a mission to democratize the agricultural business by making soy and corn transactions more accessible. To achieve this, we have chosen solid partners, such as Visa, to join us on our journey towards this goal,” said Anderson Nacaxe, director of Agrotoken in Brazil.

Combined with tokenization, Visa implemented a new on-chain sealed bid auction mechanism through smart contracts to enable a global pool of investors on the blockchain to participate in the funding process, achieving competitive price discovery. In addition, the platform utilizes a Visa technology called Universal Payments Channel (UPC), which can be connected between True digital (CBDC) and other CBDCs, stable coins or tokenized deposits, to help ensure future interoperability between digital currencies across different markets and networks.

This year’s LIFT Challenge Real Digital sought innovative technological research projects within the financial sector to assess use cases for the digital Brazilian real. Visa developed this Proof of Concept as part of the company’s ongoing efforts to work with industry partners, lead exploratory work, and apply new technologies to creatively solve well-known real-world problems.

Visa works with central banks around the world and other players in the payment ecosystem to identify compelling CBDC opportunities that can be scaled and executed through secure, innovative, practical and reliable technologies, with the goal of developing innovative digital payment solutions that can help individuals, participating businesses and authorities in the digital economy and ultimately thrive.

To learn more about Visa’s work with CBDC, visit our Digital Currency Innovation Hub. In addition, we have published an in-depth final report on the LIFT platform together with the Brazilian Central Bank which is available here.

About Visa Inc.

Visa (NYSE: V) is a global leader in digital payments, facilitating payment transactions between consumers, merchants, financial institutions and government entities in more than 200 countries and territories. Our mission is to connect the world through the most innovative, convenient, reliable and secure payment network, enabling individuals, businesses and economies to thrive. We believe that economies that include everyone everywhere lift everyone everywhere and see access as fundamental to the future of money movement. Read more at http://visa.com/

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Contacts

Allee McDermott
[email protected]