Founded US remittance company MoneyGram supports digital assets as the future of remittances.
MoneyGram International Inc. is partnering with the Stellar Development Foundation to combine its core money transfer business with the foundation’s cutting-edge expertise in moving money using blockchain technology.
“Today’s crypto world and fiat world are not really compatible,” said MoneyGram CEO Alex Holmes. According to Holmes, MoneyGram’s new product will enable cross-border payments for users with digital wallets on the Stellar blockchain. Wallet holders can convert any cryptocurrency to the USDC stablecoin and cash out the funds using MoneyGram. “We’re trying to be a bridge from the crypto world to the fiat world,” Holmes added.
The move comes amid heightened scrutiny of stablecoins following the collapse of TerraUSD, the stablecoin created by Terraform Labs. A stablecoin is a digital currency that is pegged to the value of the U.S. dollar through a reserve of cash and other assets, or in Terra’s case, an algorithm and transaction incentives.
Can USDC be decoupled?
While TerraUSD maintains a peg to the U.S. dollar somewhat differently than the mechanism that underpins USDCoin, investors remain concerned that the stablecoin may not be as stable as previously thought. Especially considering that another stablecoin, Tether (USDT), which relied on cash and a risky asset called commercial paper to maintain its peg, was unpegged on May 12.
Circle’s chief strategy officer, Dante Disparte, assured skeptics that Circle holds enough cash and liquid assets in the form of U.S. Treasuries to prevent that from happening. “We don’t put dollars in reserves and then lend them out,” Disparte told Bloomberg.
Cryptocurrencies must go mainstream
Even though Bitcoin’s price has fallen more than 50% from its November 2021 all-time high, Holmes believes the cryptocurrency still has a future. “I think it’s important to take it and bring it into the mainstream,” he said. Remittances account for 20% of the Central American country El Salvador’s annual gross domestic product and saw $589B worth of transactions in 2021, going straight into MoneyGram’s ballpark, which the Stellar Foundation will help modernize. “There are billions of people around the world who depend on cash who can benefit from the utility that digital assets and blockchain provide,” argues Denelle Dixon, CEO of the nonprofit. Dixon said El Salvador’s President Nayib Bukele’s criticism of high remittance fees was “somewhat out of place,” considering that, according to Holmes, it may be more expensive for nationals living abroad to send money using bitcoin than using traditional channels.
The open-source platform Stellar Development specializes in transferring funds using the blockchain, the public digital ledger responsible for keeping records of immutable cryptocurrency transactions.
Confidential sources told Bloomberg last year that Stellar and private equity firm Advent International were reportedly interested in buying MoneyGram after Chinese firm Ant Group pulled out of the deal amid regulatory pushback. MoneyGram competitor Western Union wants to acquire the company in 2020.
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