Visa Inc. said on Monday that it purchased a “CryptoPunk” nonfungible token, or NFT, for nearly $150,000, jumping into the growing frenzy around digital assets that some argue could be a gamechanger in the realm of art, music and ownership of virtual assets.
“We want to have a seat at the table as the crypto economy evolves,” Cuy Sheffield, Visa’s V, +0.04% head of crypto, said in emailed comments to MarketWatch on Monday.
“By participating actively in this space, we gain deeper firsthand knowledge, ultimately allowing us to better support our customers as they enter the space,” the Visa executive said.
An NFT is a unique verifiable digital asset using blockchain technology. NFTs essentially amount to digital certificate of authenticity and allow digital assets, including artwork and music that exist only on screens, to be traded and tracked.
In this case, the largest U.S. card network bought one of the unique avatars in the CryptoPunk series, a set of some 10,000 pixel-art characters made by Larva Labs back in 2017, that have now come to typify the craze around NFTs.
Back in June, Israeli entrepreneur Shalom Meckenzie bought CryptoPunk #7523 for $11.8 million at Sotheby’s.
Sheffield said that Visa’s purchase is “a great way to raise awareness about the potential of this space while providing us an opportunity to learn and help our clients navigate it.”
Indeed, NFTs are seen creating opportunities for new business models that didn’t exist before, including for artists who can attach stipulations to an NFT that ensures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value.
NFTs also give musicians and sports stars the potential to provide enhanced perks to their fans, within the easily verifiable realm of blockchain.
Visa says it doesn’t expect to be the last major institution to purchase an NFT.
“In the early days of social media, it was hard to imagine that every major brand would have an actively managed account and interact directly with these online communities,” Sheffield wrote.
“Similarly, while Visa is the first major brand to do so today, we expect that over time, many brands will recognize the value of collecting NFTs to express their brand identities and connect with passionate communities of creators and collectors,” the executive said.
Visa elaborated on its rationale for buying an NFT at its blog here.
Most NFTs run on the Ethereum blockchain network that is behind the token Ether ETHUSD, -0.76%, the No. 2 cryptocurrency in the world by market value. That is largely because the Ethereum is known for its smart contracts, which allow developers to write special instructions, or code, including those for NFTs, atop their distributed-ledger protocols.
In an NFT sale, the process of handling the auction can be encoded on the Ethereum blockchain, including holding the money from bids, usually in Ether, which is held in escrow until the winning bidder is determined.
Many crypto bulls have been hoping that bitcoin BTCUSD, -0.57%, the largest and most prominent crypto, and Ether would become more widely used in digital payment networks. Presently, crypto is still viewed as niche in the massive payment world made up of companies like Visa and Mastercard MA, +0.21%.
However, the emergence of digital assets clearly has their attention.
Earlier this year, Visa started piloting settlement of transactions on its own network with digital currency. Mastercard announced the support of some cryptocurrencies on its network, also earlier in 2021.
Executives from both companies have cited growing interest among customers for such services.
Visa’s moves come as bitcoin rose to the highest level since around May, retaking a value of around $50,000, while the broader crypto complex rose to a value of $2.1 trillion, also around its highest levels since mid May.