According to payments giant Visa, cryptocurrency users may someday be able to automatically pay their phone and electricity bills using their self-custodial crypto wallets.
Visa’s thought leadership team on cryptocurrencies put forth a solution in a blog post on December 20 that would let providers automatically “pull” money from users’ Ethereum-powered crypto wallets without requiring the user to manually approve each transaction.
In the traditional banking world, auto payments for recurring bills are commonplace. Users can authorize specific service providers to withdraw money from their preferred bank accounts to pay bills, like a Netflix subscription or a recurring phone bill.
Visa’s new feature can’t be used for self-custody wallets
According to Visa, such a mechanism is not feasible for owners of self-custodial wallets because automated programmable payments that periodically withdraw money from a user’s account “require engineering work.”
This is due to the fact that, in self-custodial wallets, only the user has access to the private keys, necessitating their manual approval of transactions because “a smart contract cannot initiate transactions on its own.”
In its technical article, Visa stated that a new kind of self-custodial wallet called “delegable accounts,” which is based on the “Account Abstraction” (AA) concept, would allow automatic recurring payments in cryptocurrency.
In 2015, Ethereum co-founder Vitalik Butering proposed an idea, which essentially makes it possible to combine smart contracts and wallets based on Ethereum into a single account and other use cases.
The Visa team claims that user accounts would “function like smart contracts” through an AA-based self-custody wallet or delegable account, meaning that people could schedule transactions without signing off to initiate each one individually.
The proposal is a part of a larger investigation by the blockchain-friendly company into fresh opportunities for blockchain innovation and a way to get around strict constraints hardcoded into Ethereum transactions.
The development team does acknowledge that, despite the ease with which auto-payments can be integrated into wallets hosted by third parties, such as exchanges, users must still have faith that these parties will properly manage their funds.
This was shown to be a significant risk this year, particularly in light of the failures of FTX, Voyager, BlockFi, and Celsius, to name a few.