Moneygram, one of the leaders in the cross-border payments and remittances market, has partnered with the Stellar Development Foundation to use the Stellar blockchain for settlements. The company will use the native version of USD coin (USDC), a popular stablecoin, to simplify and accelerate the process of sending remittances. This also means that Moneygram will act as a fiat on and off-ramp service for USD coin users.
Moneygram to Use Crypto for Remittances
Moneygram, a Dallas, Texas-based payments and remittances company, has announced a partnership with the Stellar Development Foundation, the development and growth arm for the Stellar blockchain, to make use of its capabilities for settling payments and facilitating remittances. The company will use the native version of USDC on the Stellar blockchain to move funds in a more easy and effective way.
However, neither Moneygram nor Circle are banks. United Texas Bank will serve as a settlement bank between Circle and MoneyGram, acting as a link between the two institutions.
Moneygram now becomes an off-ramp for users of USD coin as a way of getting fiat funds, and vice-versa, adding value to the USDC ecosystem. Moneygram was one of the first remittances companies to integrate blockchain when it announced a partnership with Ripple. However, this partnership dissolved after the SEC announced it was pursuing legal actions against the company in December, 2020.
Simpler, Faster, and Cheaper
The new system to be implemented by the company is expected to allow for almost instantaneous settlement times with low fees thanks to the use of the Stellar blockchain, and no implied volatility due to the use of stablecoins. About the importance of these instruments, Alex Holmes, CEO of Moneygram stated:
As crypto and digital currencies rise in prominence, we’re especially optimistic about the potential of stablecoins as a method to streamline cross-border payments… we are extremely well-positioned to continue to be the leader in building bridges to connect digital currencies with local fiat currencies.
According to Circle, this partnership will contribute to lowering the costs associated with remittances. This is one of the UN’s proposed Sustainable Development Goals, which aims to lower remittance costs from 7% to 3% of the funds sent. It will be interesting to see if cryptocurrencies can help achieve this objective in the short term.
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