Visa (NYSE:V) was one of nine finalists tasked with exploring innovative use cases based on blockchain technology for Real Digital (Brazil Central Bank-issued Digital Currency, or CBDC) in the most recent LIFT Challenge. The company teamed up with Agrotoken, Microsoft and Sinqia to develop its idea.
After months of collaboration involving researchers and engineers from the four companies, Visa presented the results of its participation in the LIFT Challenge at an event last Tuesday (25).
The solution includes a programmable finance platform designed for small and medium-sized enterprises (SMEs), especially farmers, that increases access to global capital markets, facilitates cross-currency interoperability, improves operational processes and unlocks new growth opportunities.
Small businesses can gain exposure to solutions, says Visa
Small and medium-sized agricultural enterprises (SMEs) are essential to the Brazilian economy and fundamental to global food production. However, they are usually limited to the local market structure and cannot negotiate such favorable contracts.
For example, a well-known financing method is factoring, used by a farmer to sell his future receivables at a certain discount and receive today the money he needs to buy supplies and pay for labor.
However, when using this process, the farmer usually loses a significant percentage of the receivables of the entity providing the financing. In addition, interest rates on loans to SMEs in Brazil in 2018 were 21.7%.
By expanding the financing options available to SMEs to finance their business securely and hassle-free, Visa’s prototype platform seeks to improve existing money movements and alleviate the pain caused by a lack of access to traditional services.
According to Catherine Gu, Global Head of CBDC at Visa, the contribution of small businesses in Brazil is critical and the solution is likely to help.
“The contribution of small businesses is critical to local economies, especially in Brazil, where they employ more than half of the population and generate nearly a third of the country’s GDP. At Visa, we are committed to helping them grow by exploring new technologies that make it easier for them to maintain and expand their businesses. Brazil is one of the world’s most important innovation markets. We bring our experience, scale, network and cutting-edge technologies to contribute to the advancement of practical applications for digital currencies – in this case, we enable a soybean producer to create and auction contract for the entire world in an authorized version of the Ethereum blockchain, using various interoperable forms of money.”
How Visa enables programmable financing on CBDCs
With many central banks around the world exploring the value of a central bank-issued digital currency (CBDC), Visa and the team involved in the challenge have shown how CBDCs can programmatically enable new cross-border payments and open up cross-border investment opportunities. offer 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, enable more efficient use of capital, reduce counterparty risk while taking advantage of the security, stability and protection of a commitment from a central bank through CBDC, a trusted settlement currency.
The prototype platform brings existing financial processes and resources on-chain, enabling farmers to symbolize traditional contracts. To achieve this, Visa combined Agrotoken’s tokenization expertise with existing solutions in Brazil and Latin America to deliver a tokenization process that transforms existing Brazilian legal documents into an on-chain tradable NFT.
Using tokenization, Visa has developed a new onchain auction mechanism through smart contracts that allows a global pool of blockchain investors to participate in the funding process, enabling competitive pricing to be discovered.
In addition, the platform uses a Visa technology called Universal Payment Channel (UPC), which can connect the Real Digital Future (CBDC) to other CBDCs, stablecoins or tokenized deposits to ensure cross-currency interoperability. networks.
Microsoft teamed up with Visa Blockchain Innovation
The solution also ensures user security by validating transactions using Microsoft’s Data Mesh and data masking framework.
The KYC (Know Your Customer) process verifies a user’s identity based on information verified against accredited databases, including national public security sources such as the Federal Police of Brazil, and international sources, such as the FBI.
As a second step, there is authenticity detection, checking the user’s face through information captured through optical recognition, and creating the individual score, developed by Microsoft and Sinqia.
In addition, the KYT (Know Your Transaction) engine, also developed by Microsoft, uses Machine Learning techniques, graphs and statistics to analyze digital asset transactions and can block them if evidence of fraud or suspicious money laundering activity is found. .
According to João Paulo Aragão, specialist in innovation and finance in Latin America for Microsoft, the platform tends to scale with PIX in the future.
“Going forward, the solution will enable the creation of multilateral or multi-hub and multi-currency trading and play an essential role in interoperability between digital and fiat currencies. This technology allows companies to facilitate their transactions with foreign investors and capital, expand the use of Brazil’s new digital currency along with the PIX, and generate new flows of financial transactions in the country.
Visa believes in the potential of blockchain
The LIFT Challenge Real Digital sought innovative technology research projects in the financial sector to evaluate use cases for Real Digital.
Visa developed its Proof of Concept as part of the company’s ongoing effort to collaborate with industry partners, leading exploratory work and applying emerging technologies to creatively solve known world problems.
Finally, Vanesa Meyer, Head of Innovation and Design at Visa for the Americas, believes Visa’s innovation will benefit people who use blockchain.
“Projects like these reinforce our commitment to driving innovation and making it a tangible benefit to more people, in more places. As we introduce new blockchain-based technologies, further democratize equity financing, increase market competition and expand financial inclusion, we can help small and medium-sized businesses finance their businesses in a simpler, more accessible and more secure way.”
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
