Fintech

Getting money into crypto is still too hard. Stellar and MoneyGram have a fix.

Consumers will soon be able to convert fiat money into crypto at MoneyGram locations worldwide, opening up access to people without bank accounts or credit cards.

A one hundred dollar bill becoming pixilated

Crypto on- and off-ramps have been a roadblock for the industry. A partnership between Stellar and MoneyGram aims to solve that.

Image: iStock/Getty Images Plus

The lack of solid crypto on- and off-ramps — rails for efficiently converting dollars, yen, euros and other currencies into tokens — is a bottleneck that has held back the industry’s growth.

While wealthier people in big markets such as the U.S. can move in and out of crypto easily, it’s much more difficult if you’re in an emerging market and don’t have a bank account or credit card.

Stellar Development Foundation, which supports the Stellar Network, has come up with a way to address the problem. Through a partnership with money-transfer company MoneyGram that’s launching Friday, people can bring fiat currency to a MoneyGram location, convert it to crypto and convert crypto back out to fiat. The service will use the USDC stablecoin on the Stellar network.

The service — initially available in the U.S., Canada, Kenya and the Philippines and expanding to seven more countries this month and other countries later — is an example of the ways that new crypto markets are converging with traditional finance. It also shows how crypto needs to integrate with existing financial systems to bring in mainstream users.

The partners plan to add crypto cash-outs in almost all MoneyGram countries, more than 200, by the end of June.

“It's an interesting and tough problem,” said Anand Iyer, founder at venture firm Canonical Crypto, which hasn’t invested in Stellar but is actively watching the infrastructure market. “It makes a lot of sense to [have this deal], because that's the only way you're gonna get more crypto into the ecosystem.”

If Stellar and MoneyGram pull off the project and show 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 increase access.

Finding a super-anchor

For Stellar, the deal is part of its goal of opening up access to crypto to underserved or unbanked populations. “From that standpoint, this really changes, potentially, a huge amount and really brings the cash-based world into the digital economy,” said Denelle Dixon, CEO at Stellar Development Foundation. “We're actually really trying to target those users that have cash and really grow their opportunity.”

Since Stellar launched in 2014, its focus has been payments. Last year, the company added USDC to its network, enabling people to pay much less than on other systems like Ethereum, due to Stellar’s low fees, which are typically a small fraction of a penny.

Especially in today’s bear market, boosting accessibility is a way to address the misconception that crypto is just for trading, since this improves other uses such as payments, Dixon said.

For Stellar, 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 over anything else,” she said. “In fact, we prefer stablecoins. Stablecoins are a really nice way for payments to be leveraged.”

Bringing together a traditional financial company with a newfangled blockchain group was not simple. MoneyGram and Stellar began 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 March 2021. In one key meeting last summer, Dixon told MoneyGram CEO Alex Holmes that “the thing that had been missed in a lot of different spaces is how much blockchain and crypto needs MoneyGram.”

The product was built over the next several 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 a relatively quick build. Mark Heynen, vice president of Business Development at Stellar Development Foundation, praised MoneyGram’s “ability to abstract out all the complexity.”

With this product, users can bring fiat currency to a MoneyGram location, convert it to crypto and convert crypto back out to fiat.Photo: MoneyGram

Stellar has seen payments grow 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 service businesses, stablecoin issuers and other providers of on-ramps and off-ramps. It now has about 50 anchors in places like Brazil, Nigeria, the Philippines and the U.S.

But most of the anchors on Stellar are regional players, and not all have physical cash-in or -out locations. MoneyGram will be a sort of super-anchor for Stellar.

Opening wallets

This is 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 identity and loads the funds to the customer’s digital wallet as a MoneyGram transaction using the Stellar blockchain network.

Two self-custody wallets, Lobstr and Vibrant, will be live at launch, and the companies are working on supporting other custodial and noncustodial wallets. USDC creator Circle will help convert the funds, and United Bank Texas will handle settlement between Circle and Stellar.

MoneyGram said it is offering the service with no fees for the first 12 months to boost adoption. The price of transactions will eventually be competitive with buying and selling crypto or with sending remittances, said Holmes. The World Bank reports that average remittance fees paid on conventional money transfers in 2021 were a little more than 6%.

MoneyGram sees the Stellar deal bringing in new customers who want to get into or are already into crypto, as well as providing a new product for existing customers. Holmes notes overlap between immigrants who use MoneyGram to send money overseas and Latinx populations that show strong crypto interest. In addition, by integrating with Stellar, it enables any other wallet on that network to plug into MoneyGram, adding more potential customers.

Longer term, Holmes sees crypto as having potential not just in changing money transfers but also in helping redefine money. “If I had a U.S. dollar, and I put it into a stablecoin that was then accessible to someone in Argentina, that's a little bit different than saying I have to convert it all today when I go to pick it up or when I put it into my bank account,” Holmes said. “There are some interesting future concepts around how money moves, and does it really need to be instantly translated into fiat?”

MoneyGram has been focusing on technology and innovation in recent years. Last year it brought on Sara Vassar from Thomson Reuters and Intuit as chief product officer. In 2018 it launched a mobile app through which people could manage and send their money. It also secured a deal last year to let people buy bitcoin through Coinme at MoneyGram locations.
Sponsored Content

How cybercrime is going small time

Blockbuster hacks are no longer the norm – causing problems for companies trying to track down small-scale crime

Cybercrime is often thought of on a relatively large scale. Massive breaches lead to painful financial losses, bankrupting companies and causing untold embarrassment, splashed across the front pages of news websites worldwide. That’s unsurprising: cyber events typically cost businesses around $200,000, according to cybersecurity firm the Cyentia Institute. One in 10 of those victims suffer losses of more than $20 million, with some reaching $100 million or more.

That’s big money – but there’s plenty of loot out there for cybercriminals willing to aim lower. In 2021, the Internet Crime Complaint Center (IC3) received 847,376 complaints – reports by cybercrime victims – totaling losses of $6.9 billion. Averaged out, each victim lost $8,143.

Keep Reading Show less
Chris Stokel-Walker

Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.

Enterprise

SEC cyber reporting regs may be stuck. CISA is poised to do better.

CISA’s initiative to regulate critical infrastructure on incident reporting is just beginning. The focus on industry engagement by CISA and its director, Jen Easterly, could be about to pay off.

CISA director Jen Easterly is focusing on cyber industry engagement.

Photo: Kevin Dietsch/Getty Images

As the chief information security officer of a large, publicly traded tech company, Drew Simonis has been keeping a close eye on the SEC's proposed rules to require reporting of major cyberattacks.

Simonis, who works at Juniper Networks, has some serious concerns shared by many executives in U.S. private industry. Some of the proposed cyber incident reporting rules seem like they'd be counterproductive to the goal of creating transparency, and would likely just increase confusion for corporate shareholders, he said. Overall, by requiring public disclosure of major cyber incidents within four business days, the approach seems to lack a basic understanding of the "fluid nature of security events," Simonis said.

Keep Reading Show less
Kyle Alspach

Kyle Alspach ( @KyleAlspach) is a senior reporter at Protocol, focused on cybersecurity. He has covered the tech industry since 2010 for outlets including VentureBeat, CRN and the Boston Globe. He lives in Portland, Oregon, and can be reached at kalspach@protocol.com.

Entertainment

EA mobile chief Jeff Karp on EA’s live service future

Electronic Arts is faring better than its rivals. The company’s mobile chief knows why.

FIFA Mobile, a new version of which launched in January, just had its best-ever quarter.

Photo: Electronic Arts

Electronic Arts, the sports game publisher that spent years neglecting the mobile gaming market, couldn’t have picked a better time to jump in the deep end.

Last year, EA spent close to $4 billion acquiring its way to a stronger position in mobile. This year, it launched a new iteration of its popular FIFA franchise for smartphones and released a mobile spinoff of its hugely successful Apex Legends battle royale. The company's competitors have also followed suit with even more eye-popping acquisitions, including Take-Two Interactive’s purchase of Zynga for nearly $13 billion back in January and Microsoft’s record $69 billion acquisition of Activision Blizzard, which includes Candy Crush studio King, soon after.

Keep Reading Show less
Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Policy

NYC's bungled monkeypox vaccine rollout has a familiar ring

The failures raise questions about the due diligence undertaken by officials in awarding contracts.

The tech failures are part of a broader mishandling of the monkeypox outbreak at all levels of government, which is causing public health experts to fear that the virus could already be out of hand.

Photo: Kobi Wolf/Bloomberg via Getty Images

In 2016, New York's state Attorney General Eric Schneiderman reached a settlement with a company known as MedRite Urgent Care, after Yelp caught the company paying for fake positive reviews. At the time, the attorney general's office accused MedRite of "misrepresentation and deceptive acts," for which the urgent care provider agreed to pay a $100,000 fine.

And yet, just six years later, in the midst of its fast-growing monkeypox outbreak, New York City chose MedRite to operate its monkeypox vaccine scheduler. The first day of the rollout, MedRite's system crashed, leaving New Yorkers scrambling to get access to a vaccine that is already in limited supply.

Keep Reading Show less
Kwasi Gyamfi Asiedu

Kwasi (kway-see) is a fellow at Protocol with an interest in tech policy and climate. Previously, he covered global religion news at the Associated Press in New York. Before that, he was a freelance journalist based out of Accra, Ghana, covering social justice, health, and environment stories. His reporting has been published in The New York Times, Quartz, CNN, The Guardian, and Public Radio International. He can be reached at kasiedu@protocol.com.

Latest Stories
Bulletins