- After significant partnerships with Coinbase, Solana (SOL), and other crypto heavyweights, Visa is now gearing up to expand its network in decentralized finance (DeFi).
- Its latest report also indicates that it wants to rebrand DeFi into “onchain finance.”
Visa Bridging Onchain Finance for TradFi
On Thursday, Visa, the financial giant processing $15.7 trillion in payment volume in 2024, released a report titled “Stablecoins beyond payments: The onchain lending opportunity.” The paper underscored how stablecoins have evolved from mere crypto trading tools to a foundational infrastructure in the lending sector. In addition, it discussed how Visa can bridge the participation of traditional finance (TradFi) institutions in the new onchain credit system.
Allum, an onchain data specialist and a contributor in the report, noted that onchain lending has already issued over $670 billion in stablecoin loans since 2020. Moreover, it showed that this emerging market has been rapidly expanding, with the current monthly volume at $51.7 billion across 81,000 active borrowers.
The paper explored how stablecoins, using smart contract-powered protocols, could modernize the global lending ecosystem. Ultimately, the platform would enable more transparency, efficiency, and accessibility in the credit sector.
Visa’s Goal in the New Onchain Finance Landscape
Visa, being a trusted name in the payments sector, wants to offer banks and traditional finance (TradFi) institutions leverage, letting them participate in the new system as liquidity providers to programmable onchain lending protocols. However, it emphasized that it’s not looking to issue tokens or directly fund loans. Instead, it will act as an enabler in the lending network to dodge counterpart risks. In return, it will own the APIs, analytics, compliance, and settlement that will power the interconnectivity of programmable credit to TradFi.
To illustrate the feasibility of its model, Visa cited Morpho, Credit Coop (its partner), and Huma Finance as examples. All these have successfully demonstrated how programmable, instant-settlement credit activity ideally works.
From DeFi to Onchain Finance
Interestingly, despite the paper’s focus on the inner workings of DeFi, the terms “decentralized finance” and “DeFi” were only mentioned once in the document. Visa appeared to have framed the term “onchain finance” in the rest of the report, which was a deliberate rebrand to align it with the evolving regulatory landscape, especially in its key market in the US in the advent of the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act).
The twist is an apparent attempt to elevate the new lending platform from the often permissionless, unregulated, and high-risk activities tied to DeFi, as Visa seeks the participation of heavily regulated banks and financial institutions.
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