The United States Patent and Trademark Office (USPTO) released a patent application that Visa filed to create a digital currency. The system is described as a method to digitize fiat currencies issued by central banks, through a central computer and with blockchain technology.
The Visa application was originally submitted on November 8, 2018. However, it was made public on May 14, with the authorship of Simon J. Hurry and Alexander Pierre. The document proposes a system run by a central entity computer, which receives requests to generate a digital currency registered on a blockchain. The application includes the serial number and denomination of a fiat currency, for example a banknote or a metal coin.
The objective of this system indicates that the generation of each digital currency would cause the elimination of the other circulating currency. According to Visa’s patent document, central banks anywhere could implement this method to transfer value and avoid double spending. This includes, on the bank side, the ability to replicate the transaction log.
According to the patent application, “in some executions, the fiat digital currency could be implemented using Ethereum.” Ethereum addresses would be established for the transaction processing network, central entity, and users.
The text of the Visa patent application indicates the procedure as follows:
Techniques are disclosed that include receiving, by a central entity’s computer, a request for digital currency. The application includes a serial number and a denomination of a physical currency. The central entity’s computer generates the digital currency for the denomination and is linked to the serial number.
USPTO, Visa patent application
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Generation includes registering the digital currency on a blockchain. The central entity’s computer transmits a notification of the generation of the digital currency. The central entity’s computer causes the physical currency to be removed from circulation in a fiat currency system.
USPTO, Visa patent application
A fiat digital currency against Bitcoin
The fiduciary digital currency proposed by Visa through the patent application does not give further details on the functions of the so-called “central computer”. And although the possibility of shared registration is mentioned, it is not indicated how each conversion or transaction to digital currency is validated. Similarly, it is assumed in the text that Visa does not intervene with this approach in the monetary policy of central banks.
It is worth mentioning that such a system is not related to the technological and political foundations of Bitcoin, which is the main cryptocurrency of the ecosystem. Especially if factors such as the equivalence of value between the fiduciary digital currency and its physical counterpart are considered. In addition to that the document does not express that the records of this central computer or the copies of the blockchain will be public.
Visa recently made a call for companies wishing to issue debit cards with bitcoin, through a program called Fast Track Fintech.
Visa patent and Covid-19
Visa’s patent application indicates that users would use a digital wallet, a public key, and a private key to manage digital currencies or applications. Furthermore, it suggests that the potential uses of this technology include the possibility that central banks substitute fiat money in the form of banknotes in exchange for digital or crypto currencies “with little friction”.
This alternative becomes relevant in the context of the crisis generated by Covid-19. However, the originality of the idea does not correspond to Visa (although it is a step in the private sector), since cryptocurrencies such as bitcoin represent the possibility of dispensing with the issuance of metal bills and coins, as a way of doing more efficient the exchanges of value.
The United States Congress recently considered the idea of using a digital dollar during the crisis. Although the measure was not approved in the CARES law, which is the third aid package against Covid-19, bills have been introduced before the House of Representatives and the Senate.
China has also put forward projects to completely migrate the economy to a digital currency system. Although the e-RMB is still in the testing phase, pilots have already been run in Shenzhen, Suzhou, Chegdu and Xion’an. The international community debates whether the issuance of this currency could contribute to global inflation.