Payments giant VISA has made waves into the crypto industry, offering various features to crypto users. Recently, the company has devised a new plan for cross-border payments between CBDCs.
CBDC or Central Bank mandated Digital Currency is specific crypto that usually the country’s central bank authorizes for use. Many countries are developing their prototypes for such digital currencies and we may see some of them launching in a couple of years or so.
However, with every country developing its own CBDC, cross-border transactions can become a messy affair. So, VISA has devised a Universal Payment Channel (UPC) for CBDCs.
The company has shared insights on a theoretical system connecting different blockchain networks. The new plan of VISA will allow central banks, businesses, and consumers to transfer CBDCs. They’ve released a whitepaper with the following plan:
“As the number of [distributed ledger technology] networks increase, each with varying design characteristics, the likelihood that transacting parties are on the same network decreases, thus, it is crucial to facilitate payments that are universal across networks, scalable to massive loads and highly available.”
The particular payment network will have an abstraction layer above blockchains. They’ll not have limitations related to interoperability, scalability, and availability that these types of payment solutions currently face.
A party who has to send funds will first register with the system by providing their public key. Following that, a channel opens between the registered client and the server. The server deploys a smart contract and initializes it. The channel is then pre-funded when the client and the server make deposits into the contract’s address. The channel is closed when either or both parties settle their off-chain balances.