Visa Files For “Digital Fiat Currency” Patent

  • The U.S. dollar was specifically mentioned as a potential fiat currency to be used.
  • Consensus mechanism for the blockchain has still not be chosen, though proof of stake was given as an example.

Investor Trip

Visa International has filed a patent application for digital currency on a blockchain, that could replace physical currency, with the United States Patent and Trademark Office.

According to the application, which was published on 14 May, Visa’s patent is for a “digital fiat currency” that will be using a “private permissioned distributed ledger platform”, and controlled by a central entity computer. The application also lists two records which will be kept – one that indicates the amount of digital currency created, and another which records the “removal of the physical currency from circulation in a fiat currency system”.

The patent application further describes the process by which the stablecoin’s value would be maintained:

“Every time a dollar worth of digital fiat currency is generated, the central entity ensures that a corresponding physical dollar bill is removed from circulation, in order to regulate the value of the digital fiat currency.”

The application also describes the key roles in the system, which are central entities, validating entities, redeeming entities, and users. Central entities could be a central bank that “regulates a monetary supply”, while validating entities will be blockchain nodes, “which may be peers such as banks”. Redeeming entities “may accept physical currency for exchange for digital fiat currency”, which could be ATMs or bank branches.

While a consensus mechanism was not chosen for the blockchain system, proof of stake, Byzantine fault-tolerant algorithms, and crash-fault tolerant algorithms were given as an example of potential ones. The patent further explores the possibility of using a copy of Ethereum, Hyperledger Fabric, and zero-knowledge proofs.

The application specifically mentioned the U.S. dollar as one of the potential fiat currencies to be used. Forbes, however, reported that the patent could apply to a variety of central bank currencies, such as the British pounds, Japanese yen, and Europe’s euro. Forbes further wrote:

“The physical currency of a central bank anywhere in the world could be digitized.”

Discussion
Related Coverage
Biden Issues Executive Order on Crypto
  • Joe Biden’s 82nd executive order requires government agencies to coordinate the creation of a national framework for crypto, and explore the potential of U.S. CBDC.
  • The Crypto Council for Innovation noted the order would likely lead to a much needed regulatory clarity around digital assets in the U.S..
March 10, 2022, 3:17 PM
Biden

Joe Biden, 46th President of the United States.
BiksuTong / Shutterstock

EU to Propose Digital Euro Bill in 2023
  • The bill will serve as the legal foundation for the European Central Bank’s ongoing technical work on a euro-based CBDC.
  • The European Commission is also planning to call the public for comments next month on how the digital euro could be used.
Bank of Korea Completed Phase One of CBDC Pilot
  • Korea’s central bank concluded that the CBDC “works normally” under test conditions, but more experiments were needed to confirm its viability in the real world.
  • The second phase will focus on cross-border remittance and retail and offline payments, and is expected to finish by June 2022.