Reserve Twitter Space - State of the (Stablecoin) Union

In Reserve’s Twitter Spaces which took place on March 15, 2024, Thomas Mattimore from Reserve Protocol hosted Gabo from Ugly Cash to discuss Ugly Cash’s innovative approach, leveraging crypto and traditional banking for cost-effective and inclusive cross-border transactions, and more! Read our notes below to learn more.

Background

Thomas Mattimore (Host) – Contributor at Reserve Protocol

Gabo (Guest) – Founder & CEO of Best Friend Finance and Contributor at Ugly Cash

Reserve Protocol – the first platform that allows for the permissionless creation of asset-backed, yield-bearing & overcollateralized stablecoins on Ethereum

Ugly Cash – a financial technology company, not an FDIC-insured depository institution. Banking services are provided by Bangor Savings Bank, Member FDIC.

Best Friend Finance: Linking US-Latin America with Stablecoins and Inclusive Banking

Gabo explains Best Friend Finance‘s focus on the US as a global financial hub, leveraging the US dollar and banking system to assist those in countries with high inflation, like Venezuela and Argentina, by providing smooth access to stable currency.
He explains the success in enabling dollar alternatives in regions where obtaining USD officially is challenging, utilizing $RSV and $EUSD for their technological and legal benefits, while highlighting customer perception of these as equivalent to dollars.
Gabo discusses the strategy of focusing on the US to leverage its role in global remittances, aiming to replicate their success in Venezuela globally by creating network effects through a strategy that connects the US with other countries.
He mentions the challenges faced in the US, where there’s less need for stablecoins for day-to-day expenses due to the strength of the dollar and the banking system, making the adoption of stablecoins more difficult and costly.
Gabo mentions the realization that offering stable balances in the US wasn’t sustainable or attractive compared to traditional banking, leading to the strategy of providing bank accounts that align with their mission of inclusivity, particularly targeting the US Latino population for easier cross-border transactions.
He describes the effort to create inclusive bank accounts that can be opened with a passport via an app, aiming to reduce the friction and fees associated with cross-border transactions, and the goal to enable no-cost transfers between US bank accounts and Latin American customers.
Gabo highlights the challenge of bridging traditional banking with crypto benefits to facilitate seamless and cost-free transactions between the US and Latin America, aiming to overcome the limitations and high fees of existing platforms like Venmo, Cash App, and PayPal.
Thomas summarizes, stating that in the US, stablecoins are less necessary due to effective banking systems, except for certain exceptions. However, internationally, especially in Latin America, stablecoins provide valuable access to dollars.
Ugly Cash utilizes stablecoins for Latin American users, while US customers use bank accounts, creating a powerful combination.

Revolutionizing Remittances: The Ugly Cash Initiative’s Seamless, Low-Cost Financial Solutions

Thomas highlights another aspect discussed by Gabo: the seamless transfer of dollars from US savings accounts to individuals in Latin America through a digital bridge, converting to stablecoins in the recipient’s account.
Gabo introduces the concept of a debit card, noting a caveat that balances are shown in dollars but backed by stablecoins, simplifying the user experience without requiring additional learning.
Thomas compares the use of stablecoins in an app to dollars in a bank account, highlighting their functional similarity despite different underlying mechanisms. He says that from the user’s perspective, the form of backing (crypto vs. traditional banking) is less relevant.
Gabo says that their approach is problem-solving rather than promoting cryptocurrency. Their goal is to offer more efficient and inclusive financial solutions than traditional systems, especially in providing the benefits of dollar transactions to more people.
Thomas says that Gabo’s team focused on solving a specific problem, with crypto being the solution rather than the starting point. Gabo shares his motivation stemming from experiencing hyperinflation in his home country and sees crypto as an opportunity to offer inclusive services globally.
Thomas observes the efficiency of the Ugly Cash team and asks how they managed to reduce remittance fees to 0%, seeking details on the mechanisms behind this achievement.
Gabo explains that their approach involves cutting operational costs to enhance efficiency, acknowledging a minor cost per transaction that remains but is significantly lower than traditional methods. This cost is primarily due to partnering with a third party licensed to operate in various states, a strategy chosen to accelerate market entry, with the potential for further cost optimization.
He highlights the reduction of bureaucratic and financial barriers typically faced by international individuals opening U.S. bank accounts, such as minimum balance requirements and monthly fees, by offering dollar balances in a custody system for stablecoins, thus eliminating traditional banking expenses.
Another significant cost cut is in international wire transfers, which are costly through banks and require intermediaries like Western Union for bulk transactions, leading to high fees for end-users. The ugly Cash method bypasses these costs, allowing for direct transactions from users’ bank accounts at significantly lower fees.
Thomas acknowledges the innovation, recognizing it enables micro remittance, a previously unavailable option due to prohibitive fees.
Gabo adds that their system allows for transactions as small as $1, making remittances more accessible and practical for smaller amounts.
He mentions that in Latin America, where $30 can sustain a person for multiple days, their service’s efficiency and cost reduction make such transactions viable, contrasting with the traditional system where the high cost of sending small amounts is a significant barrier.

Ugly Cash Expands App and Debit Card Services in Latin America, Excluding Venezuela

Schmidt asks if the app is open to anyone in Latin American countries and about the availability of Ugly Cash and the debit card in the region.
Gabo says that the app is available in 13 Latin American countries, with operational transfers from the US to these countries. However, Venezuela is currently excluded from new signups and transfers due to legal and prioritization issues, despite being part of their plans.
Thomas asks whether anyone in those 13 countries can sign up for ugly cash, to which Gabo affirms, highlighting the limitation only applies to Venezuela due to ongoing challenges.
Gabo explains the debit card feature, noting it is technically a debit card in the US linked to a bank account, while in Latin America, it connects to a dollar balance. The card allows spending in local and international stores, is backed by a stablecoin, and aims for launch across all 13 countries, with an initial focus on Mexico and El Salvador for remittance use cases.
Thomas says that individuals with a dollar balance, backed by $eUSD and their token in Latin America, can use the debit card to make purchases anywhere the card is accepted.
Gabo highlights the seamless experience for customers, hiding complex processes under the hood to solve real problems.
Thomas shares his experience in Argentina, highlighting the convenience of using a card over cash and the potential benefits for people to easily spend stored dollars without worrying about conversion rates.
Gabo explains the process of obtaining $eUSD on Ugly Cash, contrasting it with platforms like Coinbase. Users can deposit or receive money directly into their Ugly Cash account and send it peer-to-peer without needing to purchase a stablecoin separately. The focus is on simplifying the process for users, making it efficient and cost-free for transactions.
Thomas says that to access the stablecoin in Latin America, someone can send it from the US, making it easier to spend directly without needing to use services like Western Union.
Gabo explains that in Latin America, one can deposit multiple stablecoins, which are directly converted into their $eUSD balance. Withdrawals in stablecoins are also possible, as well as depositing $BTC and $ETH to convert into stablecoins.
In Mexico, specifically, users will be able to deposit pesos from their bank accounts, which convert into $eUSD, or use their $eUSD balance to convert back into pesos, focusing on the remittance use case.
Thomas says that in Latin America, anyone can receive dollars via remittance from a US Ugly Cash customer or another customer within Latin America directly in the app.
People can also deposit stablecoins throughout Latin America, making them usable with their cards. Specifically, in Mexico, there is the ability to deposit pesos from a bank, which are then converted into a dollar balance of stablecoins.
Gabo shares that Ugly Cash Bridge enables sending dollars across the continent, backed by a stablecoin, highlighting that this service is something banks won’t offer but Ugly Cash does, aiming to help real people.

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Show Information

Medium: Twitter (Audio)
Show: Reserve Twitter Space
Show Title: State of the (Stablecoin) Union
Show Date: March 15, 2024