Daily Brief: Visa Proves You Can Teach An Old Payments Giant New Crypto Tricks

Daily Brief: Visa Proves You Can Teach An Old Payments Giant New Crypto Tricks

about 2 years ago3 mins

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Who said old dogs can’t learn new tricks: Visa announced on Wednesday that it’s planning to launch a cryptocurrency advisory service.

What does this mean?

Visa’s been backed up against a wall recently: young-blooded fintech firms have been putting the payments company under more and more pressure, while Amazon’s just gone and blocked UK customers from using the firm’s credit cards. That’s got Visa looking for new ways to earn a buck, and it’s landed on crypto as the solution. The company probably realizes the market’s only headed one way: one of its own studies has shown that nearly a third of participants have either invested in or made payments with crypto.

Visa margins

So Visa announced on Wednesday that it’s launching a crypto advisory service, which will advise everything from businesses to central banks. And the company thinks it’s well-qualified to dole out some worldly wisdom: it processed $3.5 billion of digital currency transactions between October 2020 and September 2021, and it’s already worked with with over 60 crypto platforms.

Why should I care?

The bigger picture: Visa wants some stability in its life.

Visa did admit that payment platforms might never accept crypto as a form of payment in light of its price swings, but it’s less skeptical of stablecoins – virtual currencies that are pegged to the value of traditional currencies and are therefore less volatile. The company already accepts them as a way of settling payments, and it said it intends to go one step further by developing a range of stablecoin-focused products.

Visa stock
Source: Google Finance

Zooming out: You can teach a new dog new tricks too.

Square is likewise leaning into crypto: the payment rival announced last week that it's changing its name to Block – a pretty on-the-nose nod toward crypto’s underlying blockchain technology. The company’s even reportedly considering building a bitcoin mining system, as well as a decentralized crypto exchange for trading bitcoin and other assets.

Keep reading for our next story...

Commodity Trading Firm Trafigura Reported Record Profit

Trafigura image

At least Trafigura’s seeing the bright side of all this supply chain chaos: the commodity trading firm reported a record annual profit on Wednesday.

What does this mean?

This year’s supply disruptions have panned out well for Trafigura: the company – which makes its money by selling and shipping metals, oil, and other commodities around the world – has seen booming demand as countries scramble to get their economies back on track. That’s meant Trafigura has been benefiting from both higher prices and an uptick in orders, trading 25% more oil and 8% more metals between October 2020 and September 2021 than the same time the year before. But here’s the really important bit: the company doubled its profit over the same period to hit a new annual record.

Trafigura earnings

Why should I care?

The bigger picture: Arbitrage, Trafigura style.

Trafigura’s done well from rising prices and rising demand, for sure, but there’s a slightly more nuanced reason it’s done so well. See, supply and demand isn’t a constant across the world at the best of times, let alone in a pandemic. That means commodity prices have varied wildly from region to region depending on how in need it is, which has allowed Trafigura to capitalize by, say, buying a cheap shipment of aluminum on one side of the world and selling it for an arm and a leg on the other.

Zooming out: It’s about to get even chillier.

Europe’s having a bit of a commodity crisis right now: Germany and France’s energy prices for 2022 – which are tracked on the futures market – rose by 15% and 14% respectively on Wednesday. That’s partly because freezing temperatures have pushed up demand among frosty-fingered home-workers, which has forced the country’s providers to burn through their scarce gas, coal, and oil stores to keep up. And given that the weather’s so inclement at this time of year, they can’t exactly rely on renewable sources to make up the shortfall either…

Power crunch
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