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Visa’s secret crypto strategy: Fun

August 27, 2021, 1:07 AM UTC

Who says business has to be boring?

“The competitive advantage crypto has that most people haven’t understood yet is that we just have more fun,” says Cuy Sheffield, Visa’s head of crypto. The payments giant is practicing what it preaches: It revealed on Monday that it followed the Internet’s “cool kids” and purchased a non-fungible token, or NFT, of a CryptoPunk, one of 10,000 iconic computer-generated characters, for $150,000.

Visa says it bought a “punk”—specifically, No. 7610, a lady sporting a mohawk and green eye makeup—because of the project’s historical significance. While initially given away by a couple of crypto pioneers in 2017, the pixelated face-pics are now selling anywhere from hundreds of thousands to millions of dollars. The project represents one of the earliest and most influential experiments involving NFTs, verifiably unique crypto tokens that make digital content—anything from artwork to virtual real estate to pictures of rocks—traceable and tradeable on a blockchain, the public ledger that underpins cryptocurrencies. The punk art has also spawned myriad copycats, including “bored apes,” “weird whales,” and “pudgy penguins.” 

“Owning a punk is a signal. It signifies that you were either there early enough” to get one, Sheffield says, or that “you had enough conviction in the NFT ecosystem, and in the role they played, to be willing to spend” a lot of money to buy one. 

While the acquisition may seem odd for a corporation, it isn’t so unusual. Many companies, including many major banks and Wall Street firms, like JPMorgan Chase, UBS, and Deutsche Bank, collect famous artworks and display them at their offices. Visa already has an archive of financial artifacts, including early paper credit cards and zip-zap “knuckle buster” machines for manual card-imprinting. And other companies have already begun experimenting with NFTs too, including Coca-Cola and Anheuser-Busch. 

Crypto is just the latest technologic frontier for business—and Sheffield says he’s been having a blast getting in on the action. “In the past six months, I feel I’ve had the most fun I’ve had my entire career. I feel like I’m a kid again,” he tells Fortune

Visa is making crypto inroads. The company sees lucrative opportunity in the tech behind cryptocurrencies like Bitcoin and Ethereum. Sheffield equates the commercial potential of NFTs to the rise of e-commerce enabled by the Internet. Visa could help mediate NFT interactions between merchants and customers, for instance.

While critics say NFTs are spurious, since digital content can be replicated for free online, proponents say the tech holds other appeal. Unlike physical goods, NFTs don’t suffer wear-and-tear, and anyone can trade them instantly and cheaply. “We think there are going to be millions of new merchants that emerge that are individuals, that are creators, that can reach this global audience. It’s just, it’s powerful,” Sheffield says. “That’s the world that is coming here.”

The CryptoPunk-purchase has been a learning experience for Visa too. When the company’s crypto wallet address became publicly known, people started sending it all sorts of strange NFT items, including cartoons of naked body parts. “You can’t prevent someone from sending you something. I think, in many ways, it’s kind of like spam email,” Sheffield says.

Companies are beginning to catch on that it pays to endorse play. The folks at upstart brokerage Robinhood understand the value of a good laugh. A quarter of the company’s second quarter revenue derived from trading…Dogecoin, a jokey, doggo-themed cryptocurrency. Heck, these past few weeks at Fortune—where we sold NFTs of our own for $1.3 million—have been among the most fun in my career, too.

Will more businesses soon crash the party? “As long as TradFi”—traditional finance, that is—”is anti-fun, they’re gonna have some trouble getting into crypto,” Sheffield says.

Robert Hackett
@rhhackett
Robert.hackett@fortune.com

DECENTRALIZED NEWS

Credits 🚀 

A market data project built on Solana and backed by the likes of Virtu FinancialDRW Cumberland, and Jump Trading went live Wednesday... Sen. Cynthia Lummis is taking up the crypto cause in D.C.... ETF guru and Bloomberg Intelligence analyst Eric Balchunas expects that a Bitcoin futures ETF could be introduced as soon as the end of October... Meme stocks made a comeback this week... The U.S. topped the Chainalysis DeFi Adoption Index out of 154 countries... Well-known venture capitalist Bill Gurley has taken a personal position in Ethereum... A new survey from Deloitte says more than three quarters of financial services executives worldwide believe digital assets will be at least a strong alternative to fiat currencies within the next decade... Workers globally are finding lucrative side gigs in crypto video games like Axie Infinity... Billionaire Simon Nixon's family office is upping its crypto investments... Substack has partnered with OpenNode to start accepting Bitcoin as payment for certain publications... Oklahoma-based Vast Bank is incorporating crypto buying into its mobile banking app... Anchorage has hired former Wells Fargo blockchain executive Ken Chapman as director of banking and capital markets products... A 12-year-old from London has made more than $350,000 from a collection NFTs called Weird Whales... Sam Bankman-Fried's FTX's US affiliate, FTX.US, is adding to its collection of stadium naming rights

Debits 🐻 

The crypto market has slid considerably in recent days. Bitcoin has fallen back below $50,000, while Ethereum trades around $3,100... One of the biggest drops has come from Cardano, which at the time of writing this is down more than 5% over the prior 24 hours... NFTs are proving to be a hot spot for scammers and hackers taking advantage of crypto-unsavvy artists... The House of Representatives rejected attempts to tweak the cryptocurrency tax rules included in the White House's infrastructure plan... TikTok is supposedly cracking down on cryptocurrency content creators... Liquid Global secured a $120 million loan from FTX to reassure its capital position after a hack last week... An official at the U.S. Securities and Exchange Commission's Atlanta office called crypto scams the "flavor of the year" for financial frauds... Citadel is taking back some of the cash it invested earlier this year in GME-battered Melvin Capital.

FOMO NO MO

Global regulators appear to be headed toward a brutal collision with the cryptocurrency industry.

With digital assets on the rise, in both price and adoption, officials from Hong Kong to Washington, D.C. are beefing up their scrutiny of the still nascent market. The resulting issue that is beginning to emerge is the lack of coordination among them, though, as FTX CEO Sam Bankman-Fried recently told The Wall Street Journal: "It's messy. Each government is taking their own actions here, and it is different from place to place." From The Journal:

After years of relative inattention, regulators and lawmakers are scrambling to catch up—but it won't be easy. They aim to rein in a rebellious industry that has adopted the tech world's blueprint for aggressively deploying new products to quickly amass users—while often leaving regulatory compliance as an afterthought. 

Some of the largest crypto firms are under increasing pressure. In recent weeks, Binance, the world's biggest crypto exchange, was barred from or warned about offering certain crypto investments in the U.K., Italy, Germany, the Netherlands, Japan and Hong Kong. It said Friday that all new users would have to provide an identification document and photo of themselves to verify their identity. BitMEX, another large exchange, paid $100 million to settle a U.S. regulatory investigation related to claims of illegally selling derivatives and lackluster anti-money-laundering compliance. 

Yet few industry participants expect the crypto world, emboldened by a surge over the past 18 months in the value of and interest in their products, to suddenly change its way. Regulators are scrutinizing the industry as never before, but so far coordination appears limited and key jurisdictions are pursuing widely divergent approaches. 

BUBBLE-O-METER

$500 million

Coinbase revealed last week that it planned to buy half a billion dollars worth of cryptocurrency to keep on its balance sheet, with plans to allocate 10% of its quarterly profits to the portfolio.  

THE LEDGER'S LATEST

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Stocks waver, crypto sinks, dollar jumps as investors hold fire ahead of Jackson Hole by Bernhard Warner

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

MEMES AND MUMBLES

Stop revealing your crypto wallet addresses, corporate America.

Visa and Budweiser got in on the non-fungible-token fun this week (see top of newsletter). And in doing so, both seemed to have opened the door for trolls to inundate their wallets with, let's just say, some not-very-safe-for-work NFTs. Neither Visa nor Budweiser are the first to get NFT spammed. Coca-Cola did too earlier this year. As have The New York Times' Kevin Roose and Dallas Mavericks owner Mark Cuban.

This issue of Fortune’s The Ledger was assembled by Declan Harty, who you can follow here.

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