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Bankchain Briefing: MoneyGram deepens crypto push with crypto trading service

  • This week, we look at MoneyGram’s crypto expansion, and the potential role of digital currencies in the remittance industry.
  • We also hear from Diogo Monica, the co-founder and president of Anchorage Digital, about why more FIs are starting to offer crypto services.

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Bankchain Briefing: MoneyGram deepens crypto push with crypto trading service

Last week, money transfer firm MoneyGram launched a service that allows US consumers to buy, sell and hold cryptocurrencies from the company’s mobile app. MoneyGram is currently offering Bitcoin, Ether, and Litecoin, with plans to expand into more markets and add support for additional tokens next year, subject to global regulations.

The new functionality is being offered through a partnership with Coinme, a cryptocurrency exchange and crypto-as-a-service provider.

Alex Holmes, chairman and CEO at MoneyGram, says the company’s move towards crypto is part of a broader strategy to further its reach by tapping into a new demographic of young, digital-native consumers sending funds internationally.

“Cryptocurrencies are additive to everything we're doing at MoneyGram,” said Holmes. "As consumer interest in digital currencies continues to accelerate, we are uniquely positioned to meet that demand and bridge the gap between blockchain and traditional financial services, thanks to our global network, leading compliance solutions, and strong culture of fintech innovation."

The crypto trading service is the latest in a series of crypto-related initiatives taken by MoneyGram in an attempt to set itself apart from competitors in the money transfer space like Western Union, Wise, and Remitly.

At the start of this year, MoneyGram expanded its relationship with Coinme by acquiring a minority stake in the crypto firm. And in June, it launched a global crypto-to-cash service with the Stellar Development Foundation, which allows users to send USDC payments that can be withdrawn in cash by recipients in different countries.

Although the global crypto market continues to face strong headwinds, institutional interest in the space doesn’t seem to have waned. Companies in the remittance industry appear to be laying the foundations to expand into crypto as well. Just a few weeks back, Western Union filed three trademarks that covered managing digital wallets, exchanging digital assets and commodities derivatives, issuing tokens of value, and brokerage and insurance services.

There seems to be continued demand from consumers as well, many of whom are open to the idea of using digital currencies for international remittances, particularly in emerging markets. A recent report by crypto payments firm Wirex found that over half of consumers (52%) in the US, UK, Mexico, and Singapore see crypto as a valid alternative to sending money overseas using traditional methods, and 45% have already used crypto to send money to another country.

Driving the shift towards crypto as a cross-border payment method is frustration with existing systems, with 53% of people feeling they paid too much in fees for international remittances using traditional means, and 37% not knowing how much they paid at all.

Anchorage Digital’s Diogo Monica on linking FIs to digital assets

Running with the vision that every business will one day be a crypto business, Anchorage Digital is launching Build with Anchorage – a new full-stack crypto infrastructure offering – to link every business to crypto.

Given the recent rise of FIs’ interest in crypto custody, Tearsheet decided to catch up with Diogo Monica, the co-founder and president of Anchorage. We discussed how the company is keeping up with regulations, why more FIs are offering crypto services, and what the firm’s new Build with Anchorage offering has in store for the future.

Monica reckons outside of monitoring nuclear launch codes, running a banking institution in the US is literally the most regulated activity. Anchorage is registered with the OCC and is part of the American Bankers Association. As a first mover, the company has had its fair share of challenges, including a near-clash with the OCC.

To begin with, their registration process was slightly different. The company did a charter conversion from a Trust Charter to get their federal charter. Anchorage operated as a Trust Company for several years before applying for conversion to a federal charter.

Having run as a trust, the regulators could easily identify their policies, procedures, and technologies as they were already up and running. They had an easier time evaluating the risk trade-offs and how the company was operating. Monica credits that as the main reason why Anchorage got approved first and why it is still the only regulated crypto firm. 

While having a federal charter is beneficial, being the only regulated crypto company means that Anchorage operates under constant scrutiny and must spend a considerable amount of resources to remain compliant.

According to Monica, “self-custody is extremely important.” However, that does not mean that all of your assets should be in self-custody. Taking self-custody of bitcoins, a method referred to as cold storage, involves storing your private keys offline. Popular methods of cold storage include writing your private key down on a piece of paper or storing it on a USB hard drive for safekeeping.

Monica refers to this storage method as ‘pirate custody.’ It resembles the 1500s, when pirates used to store their gold coins in treasure chests buried in a secret location. In the same way, crypto advocates promote storing your private keys on a ‘paper wallet’ or USB ledger and keeping it in a safe. Perish the thought your house burns down, and you lose your home and your life savings. Or take James Howell, for example, who accidentally chucked away an old hard drive containing 8000 bitcoins. 

Seeing the pitfalls of self-custody, who better than the most regulated entities on planet earth, US financial institutions, could be entrusted with such a responsibility? Armed with a PhD in Computer Science, Monica partnered with a security engineer and former colleague at Square, Nathan McCauley, to launch Anchorage. 

Anchorage was initially launched in 2017 as a platform for institutions to access crypto custody services. The company has since built other crypto services on its platform at the request of its top-tier clients, which include US financial institutions. Their latest offering, ‘Building with Anchorage,’ which offers a full stack crypto infrastructure, is a crystallization of what the company has been building for the past five years. 

Highlights from our recent coverage

What makes a good web3 wallet?

The demand for digital assets and DeFi is growing, and the market needs better products to serve it. Key among these products are web3 wallets. Firms trying to build web3 wallets need to make sure their product excels in four departments: security, functionality, cross-platform and cross-chain support, and UI/UX.

Behind Betterment’s automated crypto investment offering

Betterment, a robo-advisor managing over $30 billion in assets for 730,000 customers, recently debuted its cryptocurrency offering. We hear from Jesse Proudman, vice president of crypto investing at Betterment, about why the firm decided to move into crypto.

What we're reading

  • Binance backs out of FTX rescue, leaving the crypto exchange on the brink of collapse (CNBC)
  • The collapse of the FTX empire (CoinDesk)
  • Robinhood’s crypto revenue declined 12% to $51 million in Q3 (CoinDesk)
  • Visa files metaverse and NFT trademark applications (Finextra)
  • Coinbase files to support Ripple against SEC case (CoinDesk)
  • How Elon Musk could put more crypto into Twitter (Bloomberg)
  • Revolut to introduce ‘spend from crypto’ feature for cardholders (PYMNTS)
  • Google Cloud gets into web3 with managed blockchain node service (TechCrunch)

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