Western Union to Test Stablecoin Settlement System for Global Remittances

Western Union to Pilot Stablecoin Settlement System for Global Remittances

Global payments leader Western Union is set to launch a pilot program based on a stablecoin settlement system, representing a significant advancement toward utilizing blockchain technology for remittances.

Key Takeaways:

Western Union aims to enhance its global remittance services with a stablecoin-based settlement system.
CEO Devin McGranahan emphasized that onchain settlements could lead to quicker, cheaper, and more transparent money transfers.
This initiative comes in response to the regulatory clarity provided by the GENIUS Act and increasing interest in stablecoins among institutional investors.

This new initiative seeks to modernize the handling of approximately 70 million money transfers conducted by the company each quarter, benefiting over 150 million customers throughout 200 countries.

Onchain Settlements: Cost-Effective and Faster Transfers

During the recent third-quarter earnings call, CEO Devin McGranahan highlighted that the pilot will concentrate on utilizing onchain settlement systems to lessen dependence on traditional correspondent banking methods.

“We see significant opportunities to expedite money transfers with enhanced transparency and lower costs—without sacrificing compliance or trust,” McGranahan stated.

The exploration into digital asset integration by Western Union has been ongoing for several months. Earlier this year, the company suggested a potential adoption of stablecoins but decided to wait due to volatility concerns and unclear regulations.

McGranahan pointed out that the recent enactment of the GENIUS Act, which clarifies the regulatory landscape for digital assets, has motivated the company to proceed with its plans.

As stablecoins gain traction among payment providers looking to decrease settlement times and costs, the U.S. Treasury Department revealed that the stablecoin market has exceeded $300 billion and may reach up to $2 trillion by 2028, indicating growing institutional interest.

Western Union believes stablecoins could prove particularly advantageous for users in high-inflation regions, as access to U.S. dollar-backed assets helps preserve purchasing power.

“In many areas globally, holding a U.S. dollar-denominated asset is highly valuable,” the company stated, noting that such developments align with its mission to “modernize the movement of money.”

The company's competitors are also ramping up their blockchain initiatives. For instance, Early Warning Services, the parent organization of Zelle, announced their plans to incorporate stablecoins for cross-border transactions.

Additionally, MoneyGram is preparing to launch a USDC-based savings and transfer application in Colombia to facilitate near-instant international payments.

Banks Turn to Stablecoins Amidst Growing Competition

In August, Citigroup's CEO Jane Fraser confirmed that the bank is “considering the issuance of a Citi stablecoin,” while exploring how to develop tokenized deposit services that can provide corporate clients with around-the-clock settlement options.

In June, JPMorgan introduced JPMD deposit tokens aimed at institutional blockchain transactions, as CEO Jamie Dimon questioned the overall utility of stablecoins.

JPMorgan acted as the primary underwriter for Circle’s IPO, which has seen substantial growth of over 500% since its initial offering at $31.

Notably, some institutions are looking for more control over stablecoins, illustrated by the recent proposal from the Bank of England advocating for stringent ownership regulations.

The bank has set limitations for individuals between £10,000 and £20,000 and £10 million for businesses, which elicited considerable public outcry.

Reportedly, Crypto.com is working on integrating Morpho, the second-largest DeFi lending protocol, into its platform to establish stablecoin lending markets directly on the Cronos blockchain.

This collaboration will enable users to deposit wrapped versions of Bitcoin and Ethereum (CDCBTC and CDCETH) and borrow stablecoins against them without departing from the Crypto.com ecosystem.