Unchained - Visa Is Building Infrastructure for NFTs, Smart Contracts, and L2s. Why? - Ep.280

Episode Date: October 12, 2021

Cuy Sheffield, Visa’s head of crypto, discusses Visa’s crypto game plan, stablecoin regulation, NFTs, and more. Show highlights: Cuy’s background and his journey down the crypto rabbit hole how Visa and cryptocurrency can coexist why crypto companies and fintech companies are similar what Visa is trying to solve for consumers regarding cryptocurrencies how cross-chain payment infrastructure would work why Visa requires enhanced diligence for crypto companies what countries can learn from stablecoins when building CBDCs why Visa is creating a universal payment channel for CBDCs and other cryptocurrencies why Visa chose USDC to begin making payments with the two main reasons why stablecoins are used (hint: it’s not for buying cups of coffee) how cryptocurrency is changing financial education and inclusion how crypto’s open-source ethos is helping underserved and emerging markets build financial infrastructure why NFTs are Cuy’s favorite topic how NFTs level the playing field for black artists (and artists in general) why Visa purchased a CryptoPunk and how other businesses could leverage NFTs Thank you to our sponsors! Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021       Nodle: https://bit.ly/3AXGydJ   Cuy Sheffield Twitter: https://twitter.com/cuysheffield LinkedIn: https://www.linkedin.com/in/cuy-sheffield-72082126/ NFT collection: https://tryshowtime.com/csheffield    Content: Medium https://medium.com/@cuysheffield  Tweets Thoughts on payroll deposits https://twitter.com/cuysheffield/status/1442571326447767554  DAOs as chaotic organizations https://twitter.com/cuysheffield/status/1441536551016534019   Visa Crypto Plays CryptoPunk purchase https://usa.visa.com/visa-everywhere/blog/bdp/2021/08/18/nfts-mark-a-1629328216374.html  First smart contract on Ropsten https://ropsten.etherscan.io/address/0xadb1f7e78a3ac3d0a006961f95d96bbb0ec14326#code NFT research report https://usa.visa.com/content/dam/VCOM/regional/na/us/Solutions/documents/visa-nft-whitepaper.pdf  Cross-chain Interoperability https://usa.visa.com/visa-everywhere/blog/bdp/2021/09/29/making-digital-currency-1632954547520.html https://arxiv.org/pdf/2109.12194v2.pdf  Visa + USDC https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.17821.html  https://www.forbes.com/sites/ninabambysheva/2021/03/29/visa-to-start-settling-transactions-with-bitcoin-partners-in-usdc/  Digital currency whitepaper https://usa.visa.com/content/dam/VCOM/regional/na/us/Solutions/documents/visa-digital-currency-overview.pdf  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, all, a quick note before we begin. As you may recall, I am now writing a blog on Medium. This week, I have a post up on my interview with today's guest, Kai Sheffield, a Visa. And there you can see some of the NFTs that Visa has bought and get some other highlights from our discussion. Head to Medium.com slash at Laura Shin to check out the post and to share it with your friends. Again, the URL is Medium.com slash at Laura Shin. And be sure to follow me there. And if you're wondering who the BTC candle winners are from our survey, we will announce those on Friday. And now on to the show. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto.

I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as a senior editor at Forbes, was the first Main Tree Media Reporter to cover cryptocurrency full-time. This is the October 12th, 2021 episode. of Unchained. My book, The Cryptopians, Idealism, Greed, Lies, and the making of the first big cryptocurrency craze is available for pre-order on Amazon, Barnes & Noble, or any of your other favorite bookstores. Go to bitly slash cryptopians. That's b-it.l.l-t-l-y-t-o-p-y-n-s. And you can pre-order today. The Notal Cash app makes earning crypto on your smartphone as easy as turning on your Bluetooth. Notal Cash is private, secure, and available on iOS and Android.

Visit nodle.io slash cash. That's nodal.io slash cash to start earning. The crypto.com app lets you buy, earn, and spend crypto all in one place. Earn up to 8.5% interest on your Bitcoin and 14% interest on your stable coins, paid weekly. Download the crypto.com app and get $25 with the code Laura. The link is in the description. Today's guest is Kai Sheffield, Visa's Head of Crypto. Welcome, Kai. Hello, thanks for having me. Great to be here. Let's start by having you tell us how you got into crypto and came to be the head of crypto at Visa. Oh, my. So I guess, you know, coming out of college,

I worked for a startup that was called Trial Pay, which is really a fintech and mobile advertising company. And Visa acquired Trial Pay in 2015. I was employee number 100-somethings by first job out of college. And when Visa acquired us, I didn't know anything about payments or Visa and I didn't know anything about crypto. And so as I came through the acquisition into the company, I started going down the payments rabbit hole, just trying to understand what does Visa do and how does it work. And so I got to spend a lot of time with some of the people who've been at Visa for a long time and helped to build the business. And then I happened to be living in San Francisco with some friends, and this was probably early 2017, and we randomly went down the crypto rabbit hole.

And so we were just in our living room with a few roommates just trying to understand what was going on in crypto. And what I found was that, you know, there were people at Visa who understood everything about payments in the existing payments ecosystem, and they didn't really know anything about crypto. It was brand new. And then as I, you know, discovered crypto Twitter and started to meet people in, you know, crypto, there were people who were seemingly experts and knew everything about crypto, but they

didn't know a single thing about Visa in existing payment systems and how Visa worked. And so it seemed very clear early on that the future was some intersection of the two. And so I basically decided, I want to spend the next decade of my career of how crypto and existing payment systems, you know, come together and will interact with each other. And so I became the annoying, you know, crypto person, inside a visa that was just, you know, wasn't my job, but what became this passion and to the point of an obsession where, you know, I just started asking a lot of questions and figuring out, you know, what are we doing? Who's working on this? What should we be doing? And was really fortunate that, you know, I had a number of mentors and sponsors and supporters who were also interested

in crypto. And we really worked together and made progress, you know, every single week. to the point where we, you know, created a crypto product team in 2019. And I think one of the things that really drew me in to crypto in the first place and why I got so interested in it was because I was a sociology major in college. And so I'm a big liberal arts, you know, proponent. And to me, sociology was really, it's the study of the obvious. You know, you're asking questions of why is the world the way it is today. You know, what are institutions and, you know, how do those institutions evolved? And what I realized many years after college was, you know, I was fortunate to get to go to a great school and get a degree. And I had never really stopped to analyze and think about what is

money. And I didn't really understand what money was as a concept. What was the history of money, how did it evolve in the past, and how could technology change it in the future? And as I got into crypto and started reading and learning and thinking about crypto, I was like, crypto is the sociology of money. And to explain Bitcoin and to explain what crypto is, you have to have a reference point. You have to go back to, okay, how is Bitcoin different than dollars? And when I realized that everyone cares about dollars, everyone needs money, very few people stopped to ask what is money. And so I became obsessed with that concept in that question of what is money. And if you work at a large, payments company, you care a lot about how money moves.

But to me, it just seemed like such an obvious thing that everyone should stop to question and think about what money is and how it's evolving and to make sure that we can evolve products and solutions as new forms of money and merge. That's hilarious. I love that story. It reminds me of how I became the annoying crypto person at Forbes for a while. So I relate in a lot of sense. And actually, when you talk about sociology, the first employee at Coinbase, Olaf Carlson

Wee, who now is the founder of Polychain Capital, he also studied sociology and wrote his thesis on Bitcoin and things like that. So clearly, they're so overlapped there. So when you talk about how you started thinking about how visa or payments will intersect with crypto, it's commonly thought that blockchain technology and crypto or defy or any of these things will disrupt centralized financial entities such as Visa. So when you think about putting those two together, what does that look like to you? It's a great question. And so I think, you know, first, what I realized pretty early on is that, you know, decentralization is not really this binary. And I think too often it's really seen as you have a centralized system or you have a decentralized system. When in reality,

decentralization is, it's more of a spectrum. And you can have different payment systems, you know, different layers of those systems, different applications that can exist all across that spectrum. And they can optimize for different use cases and solve different problems. And so, you know, it seemed very clear early on that it's not as simple as this winner-take- where, you know, today it's either all centralized payment systems and in the future, it's all 100% decentralized. At each layer, there can be multiple products and technologies that exist at multiple points on that spectrum serving different purposes.

So I realize it's a lot more complex than just that very simple dichotomy. And then when we really started at Visa, thinking deeply about crypto, We started just looking at, you know, this new class of fintech in the crypto wallets and exchanges. And so that was really the first step in saying that, you know, there are crypto wallets and exchanges that are, you know, growing rapidly that have millions of consumers and, you know, have billions of dollars of assets, you know, on their platforms. And these wallets, you know, tend to be pretty ambitious. and they want to be able to expand and offer more products and services. But to do that, they need to have better fiat on-ramps and offerings. And so that became a very clear opportunity where Visa has these existing products, the ability for a merchant to accept a card,

the ability for an issuer, a fintech or financial institution to issue or offer a card to consumers. And it was really this new segment, this new client vertical that, you know, started coming to us and say, hey, like, how do we make it easier for someone to purchase crypto, you know, with a Visa debit card? And then how do we enable crypto to have more utility, you know, whether it's Bitcoin or whether it's a stable coin, where you can actually use that and you can spend it somewhere? And at the same time, you know, particularly back in 2018 and even still today, very few merchants directly accept a crypto, a Bitcoin, or a stablecoin purchase directly over a public blockchain. And so if you have all these consumers in these new wallets with all of these assets that they want to be able to use those assets,

there was this opportunity for Visa to start to become a bridge where we could be the bridge between, you know, crypto wallets and assets in our existing network of 60, of 70 million merchants today. And so that just became a very obvious place to start is how do we lean in to this new vertical and really be a partner and help this new set of fintechs navigate, bringing Fiat in, and converting crypto into Fiat to get it out. And so that was the first approach. And in many ways, you could look at every crypto wallet exchange and say, wait a minute, these are centralized companies.

That's what Coinbase and FTCs and these major exchanges are. sure, they sit on top of a decentralized network, but they're really not that different in principle than neobanks and other fintechs, and they have some of the same ambitions and some of the same needs that our existing clients had. And so that was the first place that we started is Visa becoming a bridge,

helping crypto companies be able to connect into the existing payments ecosystem. And then over time, what we've seen is there's also the opportunity to do the reverse, where you have, you know, we work with over 20,000 financial institutions and banks all across the world that are a part of our network. And we think over time it's likely that most of them, if not all of them, are going to want to interact with the crypto ecosystem and with decentralized networks in some way. And so how can we become the bridge between banks and crypto where there's this complex infrastructure and new technologies that they have to navigate? and it's going to be very difficult for them to do that on their own.

And so I think we see Visa's role as really an enabler. We're a payment infrastructure company. We have one global network that we own in VisaNet that works at 70 million merchants. And then we have infrastructure to help originate and receive payments across many other networks. Blockchains and decentralized systems are just additional networks that we can help our clients be able to utilize. Yeah. And so let's talk about kind of that, you know, beginning, those beginning partnerships and how you started getting involved. And I understand, at least from some of my reading, that technically it was a little bit challenging or you guys had to get creative.

And so I'm curious, you know, for when you do work with some of these different, it can be crypto companies that are issuing credit cards. how is it that you had that work technically? And by the way, before you answer, I should just say, because I know you have a partnership with crypto.com. Crypto.com is a sponsor by shows, which I just wanted to make as a disclosure. But yeah, tell us, you know, what that looks like on the back end. Yeah, so I think first to clarify the consumer product and the experience that we want to enable, and we've started to do with partners like crypto.com and Coinbase and FTX and others, is a consumer should be able to hold a balance that can include many different types of assets.

Those could be traditional dollars. Those could be crypto dollars in the form of stablecoins. Those could be Bitcoin or other cryptocurrencies. They should be able to go to any of the 70 million merchants across the world that accept Visa. and tap to pay with a visa credential. It could be virtual within the app or Apple pay. It could be physical and be able to pay for goods and services at those merchants in a single tap at the point of sale. And so that's the experience that we think is really important to enable.

And one of the things that that solves is increasingly, we think consumers want to have access to the liquidity from their assets. They want to be able to invest and then decide they want to spend and be able to immediately buy what they want. Rather than if you think about the alternative of holding Bitcoin and you want to make a purchase somewhere, that merchant doesn't accept Bitcoin. Okay, so let me plan ahead. Let me sell my Bitcoin. Let me use ACH to push that Fiat back to my bank account, gets there in three to five days. Then I use my existing debit card.

we're in this world where people expect 24-7 instant conversions between different assets that they have. And so that's a product that we think is really valuable and makes a lot of sense for consumers who are holding assets in crypto and in stocks and other assets in the future. Now the question is, how do you enable that? Because it would be really confusing and challenging for your local dry cleaner or coffee shop or every merchant

to be able to directly receive. receive and have an acceptance point for someone to scan a QR code and to pay in Bitcoin, but not just pay in Bitcoin. And I think this is one thing that is not very well understood. If you're a merchant and what you care about the end of the day is selling a product or service, that is your business. You want to support every payment method that a consumer might want to use. And it used to be a handful of card networks.

Now, if you want to accept crypto, okay. Do you just want to accept Bitcoin? Or do you want to accept Bitcoin and other cryptocurrencies? Do you want to accept stablecoins? If so, which wants? What about the different blockchains that those stablecoins run? There is no universal, here's a QR code that I put up at my local dry cleaner. And any of the thousand cryptocurrencies or stablecoins in dozens of blockchains that they could run on, it's a seamless experience to tap in pay.

And so that becomes a major challenge and barrier to have. having direct acceptance that, you know, we think some direct acceptance will happen over time, but it's not an easy problem to solve. And so for that dry cleaner, it just wants to get paid, being able to have a consumer spend from the assets that they want that they're holding, and then having that local merchant receive, you know, the dollars to their bank account that they're used to without having to do anything differently or understand it or think about it, we think is a really valuable bridge that needs to exist. Now the question is, how do you enable that on the back end?

And so today, the way that that works is there's a conversion that happens between whether it's the Bitcoin or the stablecoin into an underlying fiat currency. And so while it feels like you're tapping to pay with your crypto.com visa card and you're spending from a balance of Bitcoin or a balance of a stable coin, crypto.com can actually convert that on the back end into fiat, and that fiat can be settled with Visa. Visa can then pay the merchant's bank in that fiat. Now, over time, what we're really focused on is how can we evolve and upgrade our capabilities to make it even easier for some crypto wallets and exchanges. And so this is what we announced with crypto.com, where instead of crypto.com, having to communicate.

convert, you know, a, let's say they're starting with a consumer balance in a stable coin, instead of them having to convert that into a traditional fiat in a bank account before they can, you know, settle up their bill, you know, with Visa of the total transactions of all their consumers, can we enable them to just send us that stable coin, to just send us USDC to an account that Visa can have at a custodian, starting with Anchorage, the same way that we receive fiat to bank accounts that we have at large, you know, global banks. And so we're continuing to really focus on how do we upgrade our core infrastructure in the back end around making these seamless conversions and the same way that Visa can convert, you know, dollars to euros, you know, when

you're spending cross-border, we think Visa should be able to convert traditional dollars to digital dollars or the reverse. And it's really just converting different form factors of the same currency. And that's what requires, you know, crypto infrastructure, it requires, you know, custody, it requires liquidity providers. There are a lot of these different pieces that we're investing in to really improve that back-end process and make it even easier for crypto wallets and exchanges to be able to offer these card products. And I saw that the block reported that Visa and MasterCard actually do enhanced diligence for crypto firms that offer credit cards, you know, over what they would do for typical issuers. And I was wondering why that was when, as you probably know, chain analysis has that really comprehensive crime report. And they found that at least for 2020, the percentage of crypto transactions that were criminal nature was less than 1% and was 0.34%,

which is a fraction for the traditional financial world. So I was curious about that. Yeah, so I'd say that what's really interesting, you know, as we move into this, you know, crypto world and this crypto ecosystem and having clients who are directly interacting with blockchain networks and in crypto wallets and exchanges is that there are new compliance tools that are available, that are extremely effective. And so if we want to ensure that, you know, there are, the barrier to entry to creating a crypto wallet in exchange is pretty low. And ultimately, we think that that's a good thing, that there are thousands of different crypto wallets and exchanges all over the world. We hold every one of our clients and partners to a very

high standard on compliance. And that's part of one of the key values that Visa provides is enabling this network where every participant of the network knows that other participants have been vetted and meet a high bar for compliance. And so when we have this new segment, this new type of client, that is now interacting with these new public decentralized networks, we agree that there could be additional risk based upon activity that can happen on those networks, but there are also additional new tools to help to evaluate and mitigate that risk.

And so we want to make sure that as we partner with every crypto wallet that can meet our high standards, we want to partner with everyone out there that we have the right tools in place to be able to both, vet them as we bring them on the network, and to actively monitor going forward. And we think that that's going to be a really important thing for the industry. And we're really excited about the innovation and the sophistication of some of these new tools that are emerging.

And so we've been an active user with our compliance team of a number of these tools for several years now. And so we spend a lot of time really focused on how can you use these new technologies, this new type of software to mitigate, you know, risk around compliance and make sure we're continuing to hold clients that interact with our network to a very high standard. And so for where you're going in this work, I did see that Visa recently released a white paper for what it was calling a universal payments channel. And the impetus was that you view this as a way to interconnect different blockchains to enable the transfer of central bank digital currencies. And I was curious for your vision of how central bank digital currencies will

interact with each other. And just curious also why Visa is pursuing this area now, given that at the moment there's only one really that has been released. So yeah, just curious for your thoughts on that. Yeah, sure. So I think one of the amazing things about, you know, being able to work at Visa and that gets me really excited is we get to work very closely both with a brilliant Visa research team. With, you know, PhDs are actually based in Palo Alto, my home office that I go into that have been doing cutting edge work on consensus mechanisms, on scalability, on privacy for several years now. And so we work very closely with them. And then on the other side, we're interacting with and engaging with most of the major central banks across the world. And one of our key approaches here is that we don't think it makes sense to look at CBDC in a vacuum.

You can't just say, okay, here's CBDC, what could CBDC be, and ignore everything else that's happening. We think you really have to understand CBDC in the context. of all of the innovation that's emerging in the private sector ecosystem, in open source developer ecosystem, what's happening with stablecoins, what's happening with public blockchains. And we think that a lot of the technologies that are being developed in the open source ecosystem could potentially be applied to CBDC or at least can really inform how central banks think about designing CBDC. And so that's a unique opportunity that we have where it's almost like we see ourselves as a translator.

There are these crazy, cool, new cryptographic primitives. And then there are very high-level conversations around policy implications of CBDC. How do we bridge those two together and help central banks understand what's happening in the crypto ecosystem? And then help the crypto ecosystem understand what some of the problems are that central banks are trying to solve. And so Visa Research has done a number of really interesting experiments and papers and work on things like offline payments, on things like payment channels and smart contracts that were then really using to help inform and educate central banks. So the announcement around the universal payment channels is one example of that. Then the other way we think about this is that in the future, it's likely that we're going to, live in a world where there are many different fiat-backed digital currencies. And we think that's

the core product. The question is, will fiat currencies become digitized? We think so. Then it's, okay, how, and what do those digital fiat currencies look like? And there are a number of different ways that that can happen. There's what exists today, which are, there are multiple different stable coins that are growing rapidly. There's USDC. There's USDP. There are many different stable coins that are growing. Those stable coins actually run on many different blockchain networks. So you could have USDC on Ethereum, on Solana, on Stellar. And so there's all this innovation and growth with many stable coins on many blockchain networks. And then you have most major central banks exploring CBDC, and it's likely that at some point in the future, there will be multiple

CBDCs. It don't think every country, or does it make sense for everyone? But there will be some CBDCs that exist. And those CBDCs that exist will likely run on a number of different networks. And so if we live in a world where you have many different Fiat back digital currencies, both stable coins and CBDC, and many. and many different, you know, blockchains, protocols, or networks that they run on

from public permissionless ones to, you know, permission ones, there's just the potential for incredible fragmentation of how will that actually work in practice. And so the same way that as a consumer, you know, you can travel and go to, you know, basically any country in the world and you can have a card or a credential issued from a bank in San Francisco.

that you can pay for your coffee in Poland. And that coffee merchant doesn't have to think about, okay, who's the bank in San Francisco that issued this? And like, do we trust them? Are we going to get paid? It just works. And so you're able to pay with your wallet or your credential issued in San Francisco. And that merchant in Poland receives their local fiat currency from their bank.

And everything is abstracted away on the back. in. And so now if we fast forward to if you wanted to enable that in a digital currency world, how could a consumer with a wallet? And by the way, we think most wallets will likely support not every single stable coin or every single blockchain. It's pretty hard to ask every wallet to support all of these different networks. And so if you have two consumers, if you have a consumer and a business, you know, if you have two businesses, there could be all these different types of payment flows, but on one side, you're going to have someone using a wallet that supports either a stable, let's say a stable coin on one public blockchain. On the other

side, you're going to have someone using a different wallet that might support a CBDC on another network. And so how can you enable seamless transfer of value that can go across currencies and across networks? And we think that that is a, you know, just enormous problem in challenge that needs to be solved for digital currency to be useful. We think it's going to take the entire private sector and public sector working together and payments ecosystem to solve. And we think that some of the potential solutions are likely to come out of a lot of the open source innovation and development that's happening in the blockchain ecosystem today. And so we're really focused on how do we help address those long-term challenges. And I saw that in order to use the UPC, people will

need to register with their identity. Does that mean that this is a permission chain? And if so, is it closed source? And for the registering, do people need to give their full KYC or like what level of registering is that? Yeah. So to clarify with UPC, this is super early. This is research. It's a paper that we wrote. We published our first smart contract to one of the Ethereum test nets, which I think that's a moment that, you know, we actually had a party. We did a watch party, you know, as we, one of our engineers, you know, published it or deployed it to the Ethereum TestNet. And it really speaks to, you know, we believe that these new technologies, these networks are going to play a major role in the future payments. And so we're learning solidity and we're writing smart contracts.

And we're really making sure that we're on the forefront of it. There are still a ton of questions around how would we implement. this? How would it be commercialized? Is it the right solution? The goal was really, let's build in public. Let's put this out there and let's get feedback and let's see what people think about the smart contract. Where did we go wrong? What could be better? And so in no ways is it saying, this is the solution and everyone's going to use these and like here are the rules and how the network works. It's here's a collection of technologies that can be used to solve a problem as a part of a broader exploration around many different approaches to solve that problem.

And our goal is to really deeply understand it, to help our clients and help central banks deeply understand it, and then work together at the ecosystem to commercialize and bring to market solutions based upon which of these technologies can solve the problem of the best. Oh, okay. Okay. So, you know, if this comes to fruition, then all these details that I asked about, they're potentially that they may change. Is that what you're saying?

Correct. So this is really focused on the technology rather than the specific rules and compliance of the network. Okay. All right. So in a moment, we're going to talk a little bit more about stable coins. But first, a quick word from the sponsors who make this show possible. The ScoreBet app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game?

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telegram at Notal community for earning tips and exclusive giveaways. Back to my conversation with Kai. So Visa has embraced USDC as a stable coin. Visa credit card issuers can integrate USC and other platforms and also send and receive USDC payments. Why USDC out of all the stablecoins? So really, the place that we started, you know, as we've, we've been closely following the stable coin ecosystem for, you know, several years now. And it's, it's been really exciting to see, you know, just the growth of it and the activity that's happening, you know, across the world and the use cases that are emerging. And so as we, you know, wanted to, you know, to explore, how can we upgrade some of our infrastructure, our treasury, and enable clients

to interact with Visa by sending and receiving stablecoins. We want to start with just, where is the demand in the usage in the first place? And so I think one of the exciting things about USDC is that, you know, we've just seen continued interest, you know, from our clients, many of which are, you know, very actively using it within their own treasury operations and infrastructure. And so, you know, when we talk to clients like crypto.com, like FTC, many of them are paying their employees in USC. Many of them are paying vendors in USDC. And so it really starts with where is their demand and usage today from clients that we serve and how can we really look to meet them where they are and to support the currencies that they're already using as a part of their

business. And then it's looking closely and really trying to understand how does that stable coin, how is it designed? How is it governed? What's the process around redemption? And to clarify, like, we see Visa's broader role as, you know, we should be, we're currency agnostic today. We should be digital currency agnostic. You know, we support, you know, hundreds of different currencies, you know, on our network. And if our clients, you know, want to use new digital currencies, we should support them as well. And so it was really, you know, where do we start? and starting with a stable coin that already has significant usage from many of our key clients made a lot of sense. But we plan to add support for other stable coins and other networks.

And so by no means was this exclusively, USDC is the only thing that we would ever support. But we were excited to see a lot of the demand and usage already. And that really informed it. And this is still, again, we're starting really small. that we did some early tests with Crypto.com, and we're progressing towards, you know, a small pilot. So it's not, we're opening the floodgates and how everything is USC.

It's, you know, how do we upgrade our infrastructure to support this new form factor for the dollar and, you know, slowly roll out to where it's an option that our clients, if they so choose, can, you know, settle their obligations of Visa by sending us value in that stable. I'm sure you're well aware at this moment in the U.S. stable coins are almost in, I don't know if regulatory limbo is quite the word, but, you know,

there's uncertainty for sure. The Wall Street Journal reported that the Biden administration wants to regulate stable coin issuers as banks. And CoinDesk reported that the SEC has issued an investigative subpoena at a circle, which is part of the consortium behind USC, although it's not clear, you know, what the focus of the investigation is. But since Visa is, working with Circle and USC. And also, I know you personally are involved in the digital dollar project. I just wondered kind of right now at this moment, what role you think private stable coins will play or should play. And by the way, the other comment that I wanted to mention was that Chairman Powell kind of said that a good argument for having a CBDC is that then you wouldn't need

the cryptocurrency. So that was kind of an interesting comment there. So it's curious for Yeah, your thoughts on the role of private stable coins. A ton of thoughts. I think to start, it's very clear that stable coins and CBDC are top of mind topics for most policymakers and regulators across the world, even outside the United States. And we're closely engaging with regulators on the topic. We think it's really important to have consumer protection, to have regulatory clarity, to have standards and make sure that the way that stable coins are operated is really in a safe way.

And so that's something that we think is productive and requires both the public sector and the private sector to work together to figure out how should that work. What should the standards and the requirements be? I'd say on the other side that we think it's really important to understand, how stable coins are being used today, and what are the potential benefits that they could have? And what are the opportunities for stable coins? And so, you know, you can't just focus on the risk. You have to focus on, like, yes, we should mitigate the risk and we should have clarity, you know, and rules around that. But we think there needs to be a broader conversation around what are the opportunities? What can you do with a stable coin that you can't do with existing dollars or,

existing payment rails that people use right now. And I think that that question is also incredibly useful for central banks that are interested in CBDC because it's really this test in this laboratory where you can see why are people using, where is the demand coming from for a digital version of a fiat currency? What are the use cases where people want a digital version of fiat currency. And it's very clear looking at the growth, there is significant demand for stablecoins. And so what are the properties that they have and how are they being used? We think are really important elements that can inform if you want to design a central bank digital currency. Would you want it to have some of those same properties? Would you want it to solve some of

those same use cases? And so, again, we can't just think about CBDDC in a vacuum and then regulating stable coins over here, we have to understand what are stable coins be used for? What are the benefits of what are the opportunities there? And I think within that, increasingly what we're seeing with stable coins is that today, the predominant use cases are not consumers buying their coffee. They're not this, you know, consumers are just rushing into, you know, moving their bank accounts, into stable coins and just holding stable coins, which I think is one type of a concern that regulators and policymakers might have. And I think, frankly, when people think about CBDC, one of the use cases that someone might think about is how do you use CBDC to buy your coffee?

And it's like this quintessential payment use case that's like, everyone just defaults to like buying your coffee. And I think you kind of start with like, what problem does this solve? There are many ways to buy your coffee today. And it works pretty well for most participants in the ecosystem. And so is that really going to easily shift everyone's behavior to now they're holding stable coins and buying their coffee directly paying with a stable coin or with a CBDC? And so it's important to unpack and look at what are the actual problems that they can solve? what are the properties they have, and what are some of the use cases?

And when we look at the use cases for stablecoins right now, I think increasingly where they're growing, there are a lot of use cases that are more B2B, that are large value transactions. I think, you know, last time I looked like the average value of a stable coin transaction is over $10,000. Like, this is not a consumer-facing everyday consumers or just now holding stablecoins or using them to buy their coffee. This is a payment rail that sophisticated businesses are using for global treasury operations. It's a very different thing. And it's solving that problem pretty well in terms of the demand and what we're seeing in the market. And that's a use

case that we think there's significant potential for. And so even for Visa, you know, a lot of people think about Visa as a retail payments company, our goal is to really say, how do we add value to all different types of transactions? And there's actually, you know, there's something like $100 trillion of B-to-B payment flows that are happening in wire transfers and checks that aren't really digitized, that aren't fast, that aren't efficient. And so if we can have a new payment rail that can be programmable, that can be more accessible, that work. works 24-7 that can enable cross-border transfers, that can be really powerful for the next class of emerging small businesses and high-growth technology companies to be able to be more

efficient in their treasury operations. And that's like the use case that we think stable coins are solving today, both crypto capital markets, having more efficient 24-7 trade settlement, as well as B-to-B, which I think are very different. use cases than what a lot of the policy conversation is around focused on just consumers that would potentially hold or use it to buy their coffee. So I think that's the first point. And then I think the second is what are the ways that stable coins could potentially help consumers? And I think there's not really enough of that conversation happening. And one of the first use cases that we're seeing are things like payroll. And increasingly in the crypto ecosystem,

there are a growing number of companies that are paying their employees in USDC. And so, you know, one of the, I think you've had the Delphi Digital team on, I said they tweeted the other day, they have engineers that they are streaming payroll to paying by the second in USDC. And so this is early. This is experimental. But if you just stop and think about that use case and say that today, you know, payroll tends to happen every two weeks or, you know, maybe twice a month. And in some places, maybe once a month. And why is that the case? Well, you know, part of it is that that's just how it's always been done. That's what the business processes are. And part of it is the payment rails that payroll runs over have been around for decades. And they're not really optimized to pay someone

by the second. It's just not something you could really do. And so now what stablecoins and public blockchains represent are a set of technologies and new payment rails where it is now technically possible to pay employees by the second. And so if you take a step back and you say, how do we leverage stable coins to actually solve consumer problems and that can actually improve people's lives and could help with financial inclusion, can help with economic inequality issues. And we think about payroll as the concept of living paycheck to paycheck, just the term, it existed when there were physical checks, and it still exists when there's ACH or wires. And so if we can help take new technologies that could have the potential, still a lot of

things that need to be built, there need to be controls, there need to be risk. But if that's something that we can do to improve how quickly, you know, people who need the money can get paid, that's solving a real problem. And so we think that there are a number of use cases that are not consumers just holding this forever instead of an FDIC insured account or not consumers just buying their coffee that should be a part of the conversation and their real benefits and their real use cases in case studies that are happening today. Well, you know, I was going to next switch the topic and ask you about NFTs, but I also was going to touch on diversity issues. And so I think I'll do that first and ask you about some comments that acting controller of the currency, Michael Sue mentioned in a recent speech where he said that a survey showed that 10% of the fully banked, say they own crypto, 12% of the unbanked say they do, and 37% of the underbanked. say that they own it. And then he said that for whites, 13% own it, blacks 18%, and Hispanics 20%. So now, the funny thing is that after I read just that portion of a speech, I thought, oh, wow, the banks really aren't serving those populations well, and so they're turning to crypto. But then his conclusion after that was, quote, to the extent that there is fools gold in the

crypto space, some of those who are going to be hurt most are going to be those least able to bear it. And I felt that that kind of maybe his view was more focused on fraud in crypto rather than any legitimate use. And I know you're very vocal. And you sort of touched on this briefly about the use of crypto for diversity and inclusion. So I was curious for what your views are on this topic. A lot of thoughts. A lot of thoughts on the topic. I think to start, there is a conversation around financial inclusion that is incredibly important, and there are a number of examples like payroll and other things that you can talk about. But I think what's important is that it can really evolve to a conversation around financial empowerment.

And one of the things that makes crypto really unique is that it's simultaneously, exists as this new technology that is fundamentally real breakthrough technical innovations that are happening. It's hard to argue that if that's not the case. It's a new industry where every crypto company I know is hiring as much as they possibly can. And we're seeing growth in terms of, you know, a platform for innovation and entrepreneurship that new companies are being formed. And there's a lot that we could talk about around, you know, just that is an opportunity for entrepreneurs. And then it's a new asset class. And one that, you know, you could argue is, is more accessible than most other asset classes, you know, have been. And so it kind of exists at those, you know, the intersection of

those three things, which we think is really unique. And there are opportunities for crypto to drive financial empowerment. And that's even, I would argue, sometimes even a bigger opportunity in just financial inclusion. So it's not just how do you give someone a bank account? How do you actually help people build wealth? And you kind of have to take a step all the way back and start with, before you even get to financial inclusion, financial empowerment, there's financial education and literacy. And one of my favorite things about crypto and what I would say, it's done for me personally, is that I'd argue that crypto is a growth hack for financial literacy. And, you know, try and sit down and talk to a teenager and say, let me give you a lecture about

inflation. Let me explain to you what inflation is, you know, what it means for, you know, your portfolio, and how you should think about saving versus investing and how you should allocate, you know, your funds. Hard to get a lot of interest there versus sit a teenager down and say, you know, let me tell you about Bitcoin and what is Bitcoin and how it works. And through explaining what Bitcoin is, you have an entire generation of consumers who are now learning core concepts around money and investing. And so it's not that crypto is the solution.

and like everything is like they should just only care about crypto. But crypto can be a way to draw people in, to get people interested in investing, and to then teach really important concepts that can help people, you know, build wealth over time. And I would argue that when you just look at financial literacy, the curriculum for financial literacy needs to consistently and constantly evolve. and be updated. And so if you ask someone about financial literacy, you know, a few decades ago, it's how to balance a checkbook, you know, how to, you know, what a certificate of deposit. It's like that would be the curriculum. And today, that's not as relevant. I've never balanced a checkbook. I don't think I've written a check. I don't know if I've actually ever

written a check. So you can't just go with, all right, financial literacy is one thing and then crypto's over here, I think increasingly people want to have opportunities to understand how they can build wealth. And there needs to be consumer protection, but part of that starts with education. And so how can you get more people interested in the concept of investing? And it's no longer just enough to teach saving and to say that you should save some money every month, if inflation exists and someone is saving and we have all-time low interest rates, there are actually racial wealth disparities get bigger and bigger if someone's saving and someone else is investing. And so I think that it's really important that we have more of a comprehensive

discussion around financial education and around how to teach investing and how to get people interested in investing and not just teach them to invest in crypto and nothing else, But if crypto can be this exciting new thing that can get spark the interest in why to invest, and if, you know, spending on a Visa debit card in earning Bitcoin back becomes the first financial asset that someone owns before they've made any other investment in their life, there are a lot of really positive elements by which you can bring them into not just, you know, the payment system, but you can bring them into opportunities to participate in investing and growing wealth themselves. And so I think financial literacy and education is an enormous opportunity and something that we care very deeply about and we're working on a number of initiatives around. And I think that also leads to new products that can be built that can help with financial inclusion, getting people paid faster.

and then new opportunities for retail investors to access new asset classes. And I think, you know, I care personally just very, very deeply about racial wealth disparities. It's something that, you know, I've been aware of for a long time within my own family and my own life, like from a very early age. And one of the things that has been frustrating to me is it's very easy to point to some of the root causes. things like redlining. And if black families weren't able to purchase real estate in the Bay Area for decades, it's pretty hard to make up decades of appreciation in gains on a home that you purchased in Palo Alto in the 60s. And you can diagnose those causes in some of the challenges,

but how do we think about what are the solutions? And I think increasingly the solutions have to be, future thinking and future looking and based upon new technologies and new asset classes. And it can't just be, oh, now we have to help more black people buy homes. That's part of it. But just buying a home alone is not enough. And so I think crypto is not the answer. But crypto should be part of the conversation around financial literacy, financial inclusion, financial empowerment.

And in fact, it can start the conversation, which I would argue is. is a huge, huge opportunity. And so this is kind of like a related subject. It's maybe slightly different. But I was noticing that one of the new hires that you made on the crypto team at Visa was for a head of crypto strategy of emerging markets. And I wondered if you at Visa notice different financial behaviors in emerging markets. And if so, how that impacts your strategy as head of crypto, or for,

for this person that had a crypto strategy for emerging markets, and what new behaviors or different behaviors you're noticing in those markets, especially for the unbanked and underbanked? So I'd say crypto is global, and the interest in it is continuing to grow in many, most markets across the world. And I think what's unique about emerging markets is that any place where there haven't been, as many opportunities to build financial products. If you think about fintech, particularly fintech in the United States,

a entrepreneur has many different platforms, many different tools, many different things where they could build a new neobank or financial product. Entrepreneurs in many emerging markets don't have those same tools and those same platforms that lower the barrier to entry to actually build new financial. products. And so I think one of the most powerful things crypto can do is provide that financial infrastructure and lower the barrier to entry to build new products. And it will lead to many more products emerging, which I think is ultimately great for consumers and great for competition. And I think the fact that if you wanted to build a product where a consumer could hold value,

let's say hold value in dollars, send or receive value in dollars. So something I'd say looks like Venmo. That is something that would be very, very difficult to build in most emerging markets on top of the existing financial infrastructure. That would require getting one of the largest banks in those markets to partner directly with you as a startup, which is, and then even they have to figure out how to get access to dollars, like, it's not an easy thing to do. Now what we're seeing is that there is this rapidly growing global developer ecosystem

of really talented engineers all across the world that are now enabled to build new financial products. And they're building on a weekend at a hackathon a mobile wallet that looks and feels like Venmo. But it happens to be on top of USDC. And so the barrier to entry and the pace of innovation that can happen, you know, in these markets where there's just a clear demand and opportunity to create better financial products, I see crypto as a major enabler for those entrepreneurs to build on top of. And so, you know, for Visa, like, we think a lot of increasingly the customers for payments are developers. And so we want to follow developers where they're going and what they're building and how can we help enable them.

And so we've spent a lot of time with fintechs and banking as a service platforms in the United States and in Europe. And now, you know, the equivalent are likely to be, you know, public blockchains and stable coins and defy and these other new pieces of infrastructure that are global on day one and exist everywhere. And so we see the opportunity of how do we help. entrepreneurs in those markets build on top of them and then be able to connect the products they build to the existing payment rails and payments ecosystem and have better Fiat on ramps and off ramps. And so there's a huge opportunity. We're spending a lot of time there and we're really excited to see how we can help the entrepreneurs that are building. So now we will transition to NFTs, but still discuss diversity and inclusion a little bit.

But you've talked about how you think crypto art can help black artists in particular. What problems do you see it solving for that group? My favorite topic. I think NFTs are absolutely fascinating. And I guess first, like the way that we've thought about them and like what are NFTs, like, what do they represent? It really speaks to how much of a general purpose technology that crypto and public blockchains have become. where crypto started as, you know, the ability to create this new asset class or these new assets like Bitcoin. You know, then crypto evolved to become really a new form factor for existing currencies, you know, like the dollar with sable coins, which are really crypto dollars.

Now crypto is becoming really a new form factor for digital media, you know, for audio, for videos, for images. And that component of PDFs who explain this of NFTs are like this file type format on a blockchain computer. And it has these properties that are incredibly powerful for the creators of the underlying files and the underlying content. If you create music, if you create art, if you create videos, now there's a new file type that can help you distribute that and help you monetize that. And I think there are so many parallels to e-commerce and so many ways the NFTs can extend many of the benefits of e-commerce. And so if you think about what e-commerce enabled, you can now set up a merchant, a store, and sell to consumers all across the world. And you could do that easily in an afternoon, you know, through a no-code platform. like Shopify. It's incredible. It used to be if you wanted to become a merchant and you wanted to open

a store, well, good luck finding space, you know, in paying, you got to put a deposit down, then you got to pay rent, and you have to have a storefront. Like there are all these things you had to do. Now you can open your laptop and you can create a Shopify store. Like that became, it lowered the barrier to entry for entrepreneurs and individuals to become merchants, which we think is fantastic for growing global GDP and just helping to improve the world. But the challenge was you had to produce and sell physical products. And that's pretty tough. And that still has a pretty high upfront cost in barrier to entry.

Now you've got to figure out, okay, you know, you could design that product digitally, but who's going to manufacture it for you? Are you going to find the right factory in China? or in another country and figure out, okay, how do you get in touch with that factory? You know, can they actually build it the right way as you want? Then you have to have it shipped. You have to have a fulfillment center. And then the pricing is dependent upon the shipping.

So you can't really sell a $5 physical good to someone who lives across the world if it's going to cost $10 to ship it there. And so even though we've gone to this world of digital commerce and e-commerce, where you can sell online, we're still very much constrained by physical goods. that people are selling. And we're constrained by both what people can sell and how many things people can buy. What NFTs are doing is they're creating the opportunity

for people to become a merchant and to engage in digital commerce just with their creative talent. The ability to manufacture or produce a digital product, a digital good, enables anyone who's creative and has an idea can now have a storefront and can now sell a digital good and participate in digital commerce. And we think that that can lower the barrier to entry significantly because you can go to an

NFT platform like OpenC and you can mint what a photograph, a piece of art or a song, you know, sure, they're gas fees. I think there's some ways you can do gasless minting now for such a fraction of the cost of anyone creating a physical product. And so we think that for the creator economy, being able to move from, you know, advertising-based business models to commerce-based business models and not, you know, let me set up a merch store, but find a factory to produce T-shirts, but actually being able to sell your core product, your core content, is incredible and can enable so many people

who have produced significant value in their content, but haven't really been able to capture that value, now they can engage in commerce and they can sell that content in a way that people can collect. And we think that that is incredibly powerful. And when we look at, like, how is this happening today? How are people using it? You know, we're seeing that there are, you know,

diverse artists all across the world that now no longer have to, you know, get into physical galleries. but can actually sell their work directly to consumers online. And I think the traditional art industry has had many gatekeepers, a number of historical areas of if you can't get listed in an auction, like, how are people going to discover and buy it from you? And now if you can leverage the distribution that you have on social media,

on large global platforms, with the ability to sell directly to them and participate in commerce, that can enable creators all across the world. to not just make a living, but really thrive and build significant value, which they've been creating the value. Now is the first opportunity they can really capture. Yeah. It's been fascinating watching Visa not only get into crypto, but then also know in NFTs, Visa bought Cryptopunk 760. And it also released a white paper to help businesses understand how they can integrate NFTs into their work and also how. Visa could help with that. And so I was curious, kind of what you see as the vision for businesses

with NFTs and in particular also how it fits in with Visa's business and why Visa bought this crypto punk. Yeah, sure. So I think first there's a, we think there's a huge opportunity for merchants and brands to leverage these new technologies to grow their businesses and grow digital commerce. And again, I think it's really useful to compare it, you know, to the early days of the internet and to e-commerce, where you had brick and mortar merchants who saw the internet coming and they're like, how do we sell online? Like, that can increase, you know, the reach of our brand and that can enable fundamentally new business models. And, you know, Visa spent a lot of time figuring out, like, how do we make it secure and easy to sell things online? And it wasn't a

given, you can do that. There was a time when people are like, what? You're going to put a card number into the internet? Isn't that terrible? And so, you know, you had both brick and mortar merchants have to figure out how to sell online. And then you had a new class of e-commerce native merchants who emerged like the Amazons of the world with new business models, new products that were facilitated by the fact that you could sell online. Now in the 2020s, you know, you have this the similar dynamic where you have, you know, e-commerce merchants who now want to figure out how to sell on-chain, where they're looking at, you know, all of the commerce that's happening on platforms like OpenC and, you know, the excitement and demand from collectors.

And they're like, how do we sell digital goods now in the form of NFTs? And then you have a new class of crypto-native and NFT-native merchants, whether, you know, marketplaces like OpenC or gaming platforms that are just building enormous new businesses, you know, selling, you know, on chain. And so ultimately, we see Visa's role as, again, being the bridge. You know, the same way that, you know, we have really started to establish, you know, our role as a bridge between crypto companies and crypto wallets and our 70 million merchants, the same way that, you know, we've started to become a bridge between banks and the crypto ecosystem. We think we can help become a bridge between merchants and the NFT.

ecosystem. And there's a lot of value we can provide as we learn about the underlying infrastructure in the technologies and the business models to help merchants and brands be successful selling on chain. So that's why we really started to follow this space very closely, try and understand it. And we were writing the white paper. And we're like, how do we just participate in this? And you learn by doing and experiencing. So we're like, why don't we buy a Cryptopunk. And it actually made sense when you, when you understand the history of Visa, and Visa's been around for over 60 years, we've actually, we have an archive and we have, you know, historical artifacts that we've collected for decades. We have early cuff links that

DeHoc gave out, you know, in the formation of Visa. You know, we have these old like zipzap machines that those are the first, you know, point of sale terminals that people use to accept cards. And so we've been collecting and displaying in our offices these cards. commerce artifacts. And we saw Cryptopunks and kind of the role that they played as being one of the first NFTs to really go mainstream and get to this point of just historical significance in being incredibly coveted and successful as this bridge between culture and art and technology. And so as a way to celebrate the past, in the present and the future of commerce, we thought it made a lot of sense to add a crypto punk to our collection. And we thought we could learn a lot through it.

And so we worked with our partner Anchorage to figure out, okay, what does it mean to custody an NFT? You know, how do you actually execute a transaction? And so it was really fun. And I think it was a great experience. And it's part of what we're trying to do is really build a crypto-native culture inside of Visa. And we believe very strongly in building. And we believe very strongly in building and experimenting and learning in public, and that if we can build and learn and become experts, we can then help our clients across the world be able to understand and become experts.

And I think that the same way that, you know, if you've never got a dial-up internet connection in the 90s, and I remember the moment that we got our dial-up internet connection, and you never logged on and surfed the web, it was very hard to tell what impact would the internet have on society, on your business, on all of these different things. We think it's similar to crypto. For anyone out there, whether you're a merchant or a business or regular, anyone, if you have

never downloaded a non-custodial crypto wallet and you've never interacted directly with a public blockchain network, you've never minted an NFT, you've never collected an NFT, it is impossible to understand the potential implications and what this technology can do. as well as all the problems that need to be solved. And like how far we are and how early we are in solutions that need to be enabled. And so that's something that we encourage our clients. We encourage everyone that we talk to. And we take very seriously internally where our crypto team and folks inside Visa broadly,

we use crypto on a regular basis because we think it's the only way that we can really learn and stay up to speed with the implications that could have. And so purchasing a crypto punk is a great example of how using crypto and participating in the ecosystem, honoring the role that crypto punks have played in the communities of collectors around it, made a lot of sense as something for us to do. I love it. It's super interesting. It has been so fun having you on Unchain. I have just loved this conversation.

Where can people learn more about you and also Visa's crypto work? Sure. So you could go to visa.com slash crypto. And I'm personally on Twitter at Kai Sheffield. Perfect. All right. Well, thank you so much for coming on Unchained. Thanks for having me.

Thanks so much for joining us today. To learn more about Kai and Visa, check out the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yun, Daniel Ness, and Mark Murdoch. Thanks for listening.