MoneyGram International Inc., one of the largest money-transfer service providers in the U.S., is trying to broaden digital currency usage.
What is this all about?
As per Bloomberg News, it is planning to launch a service in partnership with Stellar Blockchain to allow users to send Stablecoins to others and convert them to fiat currencies.
In an interview, MoneyGram CEO Alex Holmes said that the world of Cryptocurrency and the world of fiat are not precisely compatible today, and it is trying to be a bridge between the two.
When remittances are becoming popular in emerging markets, the proposed plan of digital assets such as stable coins, which maintain a 1-1 relationship with the U.S. Dollar, comes under heightened scrutiny. The service, when launched, will allow users who have digital wallets on the Stellar blockchain to convert their holdings into USDC stablecoin owned by Circle Financials and later cash them through the MoneyGram’s network.
This month, the collapse of TerraUSD stablecoin put other digital assets under the scanner and triggered market instability. The Terra is different from USDC, which is backed by a 1:1 asset reserve, and its meltdown has raised concern that stablecoin could lose its peg to the dollar.
The largest stablecoin, Tether Holdings Ltd backed USDT, lost its dollar peg briefly on May 12 as regulators questioned the risk of its reserves, which includes commercial paper. Tether released a new token Thursday and pegged it to the Mexican peso.
According to Dante Disparte, head of global policy and Chief Strategy Officer of Circle, the de-pegging of USDC is not likely to happen. The stablecoin is fully backed by an asset that is safe and liquid.
Crypto confidence
The debacle of Terra has contributed to the broader downturn in the crypto market, with the most popular digital currency, Bitcoin seeing a slump of more than 20% in May.
CEO Holmes is confident in digital currencies and says that cryptos are here to stay and will be there for a long time despite volatility and selloffs recently.
As remittances to middle and low-income countries grew by $589 billion in 2021 and are projected to increase in 2022, according to World Bank, MoneyGram’s tie-up with Steller will help spread crypto usage in emerging markets. Remittances account for more than 20% of El Salvador’s GDP, making Bitcoin a legal tender last year.
Stellar Development Foundation CEO Danelle Dixon said that billions of cash-dependent populations would benefit from the digital assets and blockchain.
Holmes said that fees for sending money to El Salvador from the U.S. via MoneyGram would be 0.5% to 2.5% of the transaction value. The cost of acquiring and transferring cryptos like Bitcoin through exchanges or digital wallets and converting them to Dollars at the receiving end can become more than traditional remittance networks.
MoneyGram, which worked with Ripple Labs Inc. earlier. Ripple was founded by Jed McCaleb, who ultimately left to start Stellar. The partnership between Ripple and MoneyGram ended in March 2021.
