The Stellar Development Foundation, which supports the Stellar network, has found a way to fix the problem. Through a partnership with money transfer company MoneyGram launching on Friday, people can bring fiat currency to a MoneyGram location, convert it to crypto, and convert the crypto back to fiat. The service will use the USDC stablecoin on the Stellar network.
The service – initially available in the United States, Canada, Kenya and the Philippines and expanding to seven more countries this month and more later – is an example of how new crypto markets converge with traditional finance. It also shows how crypto needs to integrate with existing financial systems to appeal to mainstream users.
The partners plan to add crypto withdrawals in almost all MoneyGram countries, over 200, by the end of June.
“It’s an interesting and difficult problem,” said Anand Iyer, founder of venture capital firm Canonical Crypto, which has not invested in Stellar but actively monitors the infrastructure market. “It makes a lot of sense to [have this deal]because it’s the only way to introduce more crypto into the ecosystem.
If Stellar and MoneyGram are successful with the project and show that they can attract new consumers to crypto, it could open up a much larger market for crypto and Web3, and serve as a model for other companies looking to grow the market. access.
Find a super anchor
For Stellar, the deal is part of its goal to open up access to crypto to underserved or unbanked populations. “From that perspective, it’s really, potentially, hugely changing and really bringing the cash-based world into the digital economy,” said Denelle Dixon, CEO of Stellar Development Foundation. “We really try to target users who have money and really expand their opportunities.”
Since the launch of Stellar in 2014, the focus has been on payments. Last year, the company added USDC to its network, allowing people to pay much less than on other systems like Ethereum, thanks to Stellar. low feeswhich are usually a small fraction of a penny.
Especially in today’s bear market, improving accessibility is a way to dispel the misconception that crypto is only for commerce, as it improves other uses such as payments, a said Dixon.
For Stellar, the fact that the new product uses USDC instead of its native XLM token highlights the organization’s recent focus on stablecoins. Dixon sees the future of crypto payments in stablecoins. “We don’t prefer XLM to anything else,” she said. “Actually, we prefer stablecoins. Stablecoins are a great way to leverage payouts.
Bringing a traditional financial company together with a cutting-edge blockchain group hasn’t been easy. MoneyGram and Stellar started talking in 2019, and the companies then built an “adapter” that showed it was possible for Stellar’s and MoneyGram’s systems to connect.
The companies started talking about this current product in March 2021. In a key meeting last summer, Dixon told MoneyGram CEO Alex Holmes that “what had been missing in a lot of different spaces was is how much blockchain and crypto need MoneyGram”.
The product was built over the following months and a pilot began in November. MoneyGram has licenses and operations in 200 countries and territories, with more than 420,000 agent locations, which allowed for relatively rapid construction. Mark Heynen, vice president of business development at the Stellar Development Foundation, praised MoneyGram’s “ability to abstract away all the complexity.”
With this product, users can bring fiat currency to a MoneyGram location, convert it to crypto, and convert crypto back to fiat.Photo: MoneyGram
Stellar has seen payments increase by more than 500% on its network over the past year, but it needs to increase access for retail users. In 2016, it launched its first anchors – a network of regulated financial institutions, money services businesses, stablecoin issuers, and other on-ramp and exit providers. It now has around 50 anchors in places like Brazil, Nigeria, the Philippines and the United States.
But most of the anchors on Stellar are regional players, and not all of them have physical deposit or withdrawal points. MoneyGram will be a sort of super-anchor for Stellar.
Here’s how it will work: A customer initiates a transaction on a compatible wallet, then brings dollars or other fiat to a MoneyGram location. The agent verifies the identity and loads the funds into the customer’s digital wallet as a MoneyGram transaction using the Stellar blockchain network.
Two custodial wallets, Lobstr and Vibrant, will be live at launch, and the companies are working on supporting other custodial and non-custodial wallets. USDC creator Circle will help convert the funds and United Bank Texas will handle the settlement between Circle and Stellar.
MoneyGram said it was offering the service at no cost for the first 12 months to drive adoption. Transaction pricing will ultimately be competitive with buying and selling crypto or sending remittances, Holmes said. The World Bank reports that the average remittance fee paid on conventional money transfers in 2021 was just over 6%.
MoneyGram sees the Stellar deal attracting new customers who want to get started or are already in crypto, as well as providing a new product for existing customers. Holmes notes an overlap between immigrants who use MoneyGram to send money overseas and Latinx populations who show a strong interest in crypto. Moreover, by integrating with Stellar, it allows any other wallet in this network to connect to MoneyGram, thus adding more potential customers.
Longer term, Holmes sees crypto as having potential to not only change money transfers, but to help redefine money. “If I had a US dollar and put it in a stablecoin that was then accessible to someone in Argentina, that’s a little different than saying I have to convert everything today when I go to get it or when I put it in my bank account,” Holmes said. “There are some interesting future concepts of how money flows, and does it really need to be instantly translated into fiat?
MoneyGram has focused on technology and innovation in recent years. Last year, he recruited Sara Vassar from Thomson Reuters and Intuit as a product manager. In 2018, he launched a mobile app through which people could manage and send their money. It also struck a deal last year to allow people to buy bitcoin through Coinme at MoneyGram stores.