The global payments platform MoneyGram announced on Tuesday that it’s launching a non-custodial wallet to help its users move funds between fiat currency and USDC, a stablecoin pegged to the U.S. dollar.
The move represents the legacy fintech company’s latest foray into crypto, with MoneyGram continuing its work with the Stellar blockchain to power its wallet.
In an interview with Fortune, MoneyGram CEO Alex Holmes said the company has undergone a digital transformation over the past five years to “dispel misconceptions” that it would be displaced by products that don’t rely on cash.
“We’re redefining paradigms around what it really means to move money between fiat currencies,” he said.
The elusive use case
As the embattled crypto industry continues to search for real-world applications to drive mass adoption, remittances are often framed as a holy grail. Cross-border payments are still encumbered by slow processing times and expensive fees, with the real-time settlement capabilities of crypto presenting a possible solution.
That reality has not come true, as many blockchains are unable to process transactions at scale. Furthermore, gas fees associated with on-chain transactions, combined with off-ramp challenges into fiat currency, make crypto payments unfeasible for most people.
Blockchain projects from Stellar to Ripple have sought to prioritize cross-border payments but mostly have come up short due to adoption shortcomings and regulatory uncertainty.
MoneyGram has taken a unique approach. While it’s developed a digital wallet and partnered with Stellar to allow users to buy and hold cryptocurrency, Holmes has cautioned that crypto won’t supplant the supremacy of cash.
“I do think that there’s probably more noise than there really is value at this point,” he told Fortune about crypto companies in a previous interview.
MoneyGram’s new non-custodial wallet is a more full-throated leap into the world of digital assets. Holmes said it represents the next step in the company’s experimentation on how to leverage blockchain technology to allow users to move funds around the globe, while understanding that they still need to end up with cash—not cryptocurrencies—as an end result.
With the platform’s normal money transfer service, users need to pick a destination for their funds. In other words, if they send U.S. dollars to Mexico to be received in pesos, they can’t choose to hold the funds in between before completing the transfer into pesos, due to limitations in global banking.
According to Holmes, crypto helps solve this dilemma, with some users wanting to be able to hold their funds digitally in U.S. dollars due to fluctuations in exchange rates or to hedge against inflation. With the non-custodial wallet, users can deposit cash and hold the funds as USDC before deciding when to transfer it into a different currency.
Unlike many non-custodial wallets—where users control the funds, rather than a third-party service—MoneyGram’s new product will have full “know-your-customer” requirements and will only be compatible with other MoneyGram wallets. While this limits its functionality with the broader crypto ecosystem, it also shields MoneyGram from the regulatory scrutiny often associated with the uncertain world of decentralized finance.
Remittance companies like MoneyGram and Western Union are often associated with high fees, although Holmes said MoneyGram has been working to reduce costs. According to the company, the average global cost to consumers is around 3%, which is lower than the industry average of 6.3% reported by the World Bank. The company also says that digital transactions tend to be lower than 1%, which would compete with other crypto-powered remittance services like the Mexico-based Bitso.
For now, the non-custodial wallet will be limited to countries with KYC capacity. Holmes said that around 40 can currently support a digital KYC process.
“We’re turning MoneyGram into a global ATM concept using blockchain,” he said.
