Celo Blockchain
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Using stablecoins to send money across borders

Akshat Singh


Transferring money across borders through traditional channels can be excruciatingly expensive and slow. Let’s explore what stablecoins are, and how they can bridge the gap between versatile yet volatile cryptocurrencies and more stable yet increasingly unwieldy fiat currencies, with regard to cross-border payments and fund transfers.

What are stablecoins?

Basically, stablecoins are types of cryptocurrencies whose values are pegged to those of real-world fiat currencies or other assets, such as gold. They are designed to be more stable alternatives to highly-volatile cryptocurrencies, like bitcoin (BTC), which makes them more suitable to use for everyday transactions and currency exchange. 

One of the most popular stablecoins used today is Tether, which always maintains a 1:1 ratio with the US dollar, which basically makes USDT a completely digital equivalent of the US dollars in your pocket. Similarly, the stablecoin that Kaala uses to store and transfer your funds is called cUSD (Celo dollars), which is also tied to the value of the USD.

The entity behind a stablecoin (the Celo Foundation in cUSD’s case) usually achieves this parity by setting up a reserve where it securely stores the assets backing the stablecoin (ex. 1 million USD kept in a bank to back 1 million units of a stablecoin). In these cases, the assets in reserve effectively serve as collateral for the stablecoin, which stands in stark comparison to cryptos like BTC and ETH (ethereum), which aren’t backed by anything at all.

Why use stablecoins?

The biggest advantage of cryptocurrencies, in general, is that all transactions are transparent to the public, yet still remain anonymous because no personal data is stored on the blockchain. Decentralized cryptos also aren’t managed by central banks or other financial institutions, and so are much more versatile as they can easily and instantly be traded and transferred, without the cost and other constraints of moving money through banks and other intermediaries.

The less-volatile nature of stablecoins like cUSD also give you more peace of mind in converting your real-world cash to virtual currencies. You would always know, for example, that 1 USDT will always be the equivalent of 1 USD, and therefore never worry about the value of your crypto wildly fluctuating overnight (unless the same happens to USD).

These features make stablecoins ideal for people who want to avoid the usual challenges, exorbitant fees, intrusive access to your personal data, and long processing times associated with bank wire transfers and other traditional fund transfer methods. Crypto wallets, like Kaala, help you take full advantage of cUSD and blockchain technology to enable fast and easy money transactions to and from anywhere, right from your mobile device.

Stablecoin settlement as an alternative to SWIFT

Most wire transfers processed by banks today go through the decades-old SWIFT network (which wasn’t even built for the purpose it largely serves today). Based on experience, you might already know that it’s a slow and expensive system - not exactly keeping in step with today’s online era of 24/7 connectivity, mobile devices, digital assets, and blockchains.

Cryptocurrencies are widely known to overcome the dated weaknesses of SWIFT with regard to cross-border transfers, meaning instant payment processing, zero transaction limits, more security and privacy, and much more affordable fees. And crypto wallets, like Kaala, are the mobile-first gateways that provide the keys to unlock all these possibilities.

Processing international transactions with stablecoins also involves no currency exchange - another potentially painful cost point with traditional transfers. With Kaala, for example, you’re not sending USD from Atlanta to be cleared and converted by an intermediary to be received as EUR in Rotterdam - the cUSD you send is exactly what the recipient receives.

cUSD stablecoin and Kaala

Kaala is based on technology built around the mobile-focused Celo blockchain, and cUSD (Celo dollars) is the stablecoin that Kaala balances are stored in and transferred with. In other words, the real-world money that you put or receive in your Kaala wallet is converted to cUSD in order to unlock the full potential and features of digital money management - all without you needing to be an expert on cryptocurrencies or blockchain technologies.

Kaala allows users to transfer funds directly to their phone contacts, instead of anonymous crypto addresses dozens of characters long. And, very interestingly, unlike other cryptocurrencies that require tremendous amounts of energy to sustain their infrastructure (with great environmental and economic impact), the growth, maintenance, and transfers of cUSD through the Celo blockchain are all responsibly built to be carbon negative.

This is how Kaala is able to promise - and deliver - unlimited and secure instant cross-border payments from anywhere and at any time.