Direct wallet connectivity

Visa and the crypto payment network Mesh have formed a partnership to change how digital assets interact with traditional retail. The agreement allows people to spend cryptocurrency and stablecoin balances directly from their digital wallets at merchants within the Visa network. This system removes the need for a user to transfer funds to a bank account or carry a separate physical crypto card. The scale of this integration involves more than 175 million merchant locations. These locations are spread across more than 200 countries and territories. Merchants do not have to change their existing checkout systems to accept these payments because the transactions move through the established Visa network.

The mechanics of the system rely on Mesh to connect various stablecoin and crypto wallets to Visa payment credentials. These credentials will be provisioned through participating wallet apps. While the partnership has been announced, Mesh has stated that the specific participating wallets, the supported devices, and the final launch dates are not yet published. The rollout plans are currently being finalized. This development follows a previous integration Mesh completed with Bybit Pay in September. That earlier project allowed users to spend directly from their exchange balances on certain supported platforms.

Conversion and compliance

Mesh is taking on the role of the technical and regulatory intermediary in this arrangement. The company handles the funding of transactions and the conversion between different asset classes. This includes moving value between cryptocurrencies, stablecoins, and fiat currencies. Beyond the technical conversion, Mesh is also responsible for managing customer onboarding. This includes meeting Know Your Customer requirements, which are standard for financial services. By handling these backend processes, Mesh allows the merchant to receive payment in their preferred currency without interacting with the underlying blockchain technology.

The financial standing of Mesh suggests significant backing for this infrastructure. In January, the company raised $75 million in a funding round. Dragonfly led that investment round. This capital injection resulted in a valuation of $1 billion for Mesh. The focus of the company is to link digital asset wallets with the global payment network, effectively turning a standard digital wallet into a source of funds for everyday purchases. This architecture differs from previous crypto card models where a user typically had to pre-load a specific debit card with fiat converted from crypto.

Institutional risk management

As spending options expand, the focus on security for financial institutions is increasing. Mastercard has introduced a tool called Stablecoin Security to address risks in the sector. This service was unveiled on a Monday at the Money20/20 USA conference. It is designed to help banks and payment providers identify suspicious stablecoin transactions before they are settled. The tool combines traditional payment data with blockchain analytics. The goal is to flag fraud, scams, and sanctions exposure. It also looks for other financial crime risks that might be hidden in onchain activity.

Mastercard noted that stablecoins add a layer of complexity for traditional banks. Funds can move across multiple wallets and different blockchains very quickly. This makes it difficult for a bank to assess the risk of a transaction throughout its entire lifecycle. Once a transaction is settled on the blockchain, recovering stolen or fraudulent funds is often impossible. The Stablecoin Security tool generates a risk score for a transaction before it is completed. This allows a bank to see which payments might require a more detailed review. The initial partners for this tool include Borderless.xyz and Keyrails.

Market expansion and forecasts

The push into stablecoin infrastructure follows major capital moves by Mastercard. In August, the company acquired BVNK for $1.8 billion. Mastercard also recently announced its Global Money Platform, which is intended to bring stablecoin payments to various businesses. These moves occur at a time when the growth of the digital dollar supply has slowed down significantly during this year. However, transaction volumes have continued to accelerate. This growth in volume is being driven by use cases like remittances and cross-border payments.

Standard Chartered has provided a long-term outlook for this sector. A recent report from the bank suggests the stablecoin market could reach $2 trillion by the year 2030. This date is two years later than the initial forecast the bank had provided. The current market dynamics show that while the total supply of stablecoins might not be growing at previous rates, the utility of these assets for moving money is increasing. Mastercard expects its new security tool to reach global commercial availability next year.

Sources

1. CoinTelegraph, Visa, Mesh partner to enable crypto spending at 175M merchant locations, https://cointelegraph.com/news/visa-mesh-partner-crypto-spending-175m-merchant-locations

2. CoinTelegraph, Mastercard launches stablecoin risk screening for banks and payment providers, https://cointelegraph.com/news/mastercard-stablecoin-risk-screening-banks-payments

Which rail do you actually use for a cross-border payment today: a card, a bank wire, or a stablecoin?

Charts and the full source list: https://medium.com/@tomasrada8080/beyond-the-card-the-new-architecture-of-stablecoin-payments-c0fd0e5d2665