Moneygram to offer transfer service using Stellar's blockchain

Money transfer company MoneyGram is looking to launch a new overseas money transfer service, in partnership with the Stellar blockchain, which would allow users to send stablecoins and easily convert them into fiat currency.

FACTS

• Users of digital wallets on the Stellar blockchain will be able to convert their holdings into Circle's USDC stablecoin.

• Circle's USDC stablecoin went public in 2018. With a market capitalisation of $53.8 billion, it is now the second largest stablecoin.

• United Texas Bank will serve as the settlement bank and act as an intermediary between Circle and Moneygram.

• Clients will also be able to cash in these assets using MoneyGram's network.

CHALLENGES

• Betting on a technology of the future: Despite the recent price volatility, Moneygram's CEO is confident in the future of stablecoins and even wants to promote this technology to make international exchanges more fluid. According to the World Bank, remittances to low- and middle-income countries reached $589 billion last year and are expected to increase further this year.

• Speed up payment times: Moneygram is challenged on the commissions charged but also on the delays in payments. This new partnership with Stellar will greatly accelerate the payment process, which will take place in near real time.

• Building on a new partnership: MoneyGram has ended its partnership with Ripple signed in 2019. This partnership allowed MoneyGram to use Ripple's services for cross-border payment and currency settlement.  But, Ripple was the subject of a complaint by the US Securities and Exchange Commission (SEC), which also affected MoneyGram, prompting the company to seek a new partner.

MARKET PERSPECTIVE

• To encourage wider adoption of cryptocurrencies, MoneyGram, has already been allowing its users to buy and withdraw bitcoins from its physical network since last year.

• The collapse this month of the stablecoin TerraUSD highlighted the risks associated with these types of digital assets. While Terra is different from the USDC, which is backed by equivalent dollar assets held in reserve, Terra's collapse raised concerns that these stablecoins could also lose their anchor.

• Meta has also begun experimenting with new money transfer channels and last year launched a Pax-based transfer service integrated with whatsApp.

• PayPal has announced that users can now transfer their crypto funds outside its platform. This is a long-awaited feature that will bring the company's product closer to other popular crypto-currency services.