Bitcoin, the world largest virtual currency, is not real money and Visa will not get involved in it. These were the sentiments expressed by Alfred Kelly, the CEO of Visa. Mr. Kelly said he did not view Bitcoin as being a player in the payment system. He said this during a recorded interview at the National Retail Federation Conference in NYC.
This was despite the fact that Bitcoin has emerged in recent times as a digital coin, which can be used to buy a range of goods. Kelly was quite adamant about Visa’s position. He said,
We at Visa won’t process transactions that are cryptocurrency-based. We will only process fiat currency-based transactions.
The Difference Between Fiat Currency and Bitcoin
According to Investopedia, fiat currency such as the US dollar is issued by central banks as legal tender. However, there are no physical commodities backing it.
Nobody issues Bitcoin, as explained by CoinDesk. Instead, you have to mine it using powerful computers located globally. These computers are always competing to solve complex equations. The miners then store all of their activity in a permanent record called the blockchain ledger and share it with everyone.
Right now, the use of Bitcoin for payment is quite limited. You can only buy a few things with it, such as booking a hotel. However, it is often traded as a valuable commodity, like gold. According to Kelly, Bitcoin is more of a commodity in which someone could invest in rather than a system of payment. He added that it was a hugely speculative commodity at that.
Mr. Kelly may not be wrong about the speculative nature of Bitcoin. In just the last two days, Bitcoin has lost over a quarter of its value. In the last month, its value has dropped by almost half after it reached its highest level of $20,000 in around December of 2017. However, even with its recent losses, the cryptocurrency has gained over 1000% in the last 12 months.
Other financial executives have not been optimistic about virtual currencies either. One such example is the CEO of Bank of America, Brian Moynihan. When asked about virtual currencies during a post-earnings conference, he said that people could buy cryptocoin assets at other companies, but not at Merrill Lynch. This was after the financial giant prohibited all its advisors from purchasing any cryptocoin assets for clients.
What it Could Mean for Cryptocoins
This is just more bad news in a week that has been quite bad for the cryptocurrency markets. Numerous financial institutions have banned or stopped the use of cryptocurrency in their systems. In the short term, it could make it harder to transact in cryptocoins. However, there are always innovative minds out there that can find a solution.