MoneyGram CEO Confident in USDC Stablecoin for Cross-Border Payments
Established U.S. money-transfer company MoneyGram backs digital assets as the future of remittance.
MoneyGram International Inc. is partnering with the Stellar Development Foundation to blend its core money-transfer business with the foundation’s cutting-edge expertise in moving money using blockchain technology.
“The world of crypto and the world of fiat are not really compatible today,” said Alex Holmes, MoneyGram’s chief executive. MoneyGram’s new product, according to Holmes, would enable cross-border payments for users with digital wallets on Stellar’s blockchain. Wallet holders can convert any crypto 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.
This move comes amidst greater scrutiny on stablecoins following the crash of TerraUSD, a stablecoin created by Terraform Labs. A stablecoin is a type of digital currency that is pegged to the value of the U.S. dollar through reserves of cash and other assets, or in Terra’s case, an algorithm and trading incentives.
Could USDC de-peg?
While the mechanism by which TerraUSD maintained its peg to the dollar differs somewhat from the mechanism used to prop up USDCoin, investors are still concerned that the stablecoins may not be as stable as previously thought. Especially in light of the de-pegging of another stablecoin, Tether (USDT), on May 12, which relied on cash and high-risk asset known as commercial paper to maintain its peg.
Circle chief strategy officer Dante Disparte reassured skeptics that Circle holds enough liquid assets in the form of cash and U.S. Treasuries to prevent such a scenario. “We’re not taking the dollar and putting it in the reserves and then lending it out,” Disparte said to Bloomberg.
Cryptocurrencies must be brought into the mainstream
Despite the price of bitcoin being down more than 50% from an all-time high in November 2021, Holmes believes cryptocurrencies still have a future. “I think adopting it, bringing it into the mainstream is important,” he said. Remittances, which constitute 20% of Central American nation El Salvador’s annual Gross Domestic Product, and saw $589B worth of transactions in 2021, play right into the MoneyGram’s ballpark, which the Stellar Foundation will help modernize. “There are billions of cash-dependent people globally who could benefit from the utility that digital assets and blockchain provide,” opines Denelle Dixon, CEO of the nonprofit. Dixon says that El Salvador President Nayib Bukele’s criticism of high remittance fees “was slightly misplaced,” considering that, according to Holmes, it can be more expensive for nationals living abroad to send money using bitcoin than to use traditional channels.
Open-source platform Stellar Development specializes in moving money using the blockchain, the public digital ledger responsible for holding immutable cryptocurrency transaction records.
Confidential sources told Bloomberg last year that Stellar and private equity company Advent International was reportedly interested in buying MoneyGram, following interest from Chinese firm Ant Group, which pulled out of the deal in the face of regulatory resistance. Western Union, a MoneyGram competitor, wanted to buy the company in 2020.
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