MoneySwitch: Bringing a $12 billion Ecosystem to Avalanche
Cross-border payments represent the financial lifeblood of the global economy. From micropayments from individuals to larger transactions made by businesses and governments. Remittances, aid transfers, and foreign investment. Capital must flow from one nation to another, but it remains one of the worst offenders for innovation. Despite their critical importance, the entire framework still relies on technology built in the 1970s: the SWIFT system.
Cross-border payments power international trade flows, globalized economic activity, and general capital growth worldwide.
Why is the system so broken, slow, disparate, and expensive?
Well, it was until MoneySwitch.
MoneySwitch
MoneySwitch operates under the DeFi mullet thesis: FinTech in the front, DeFi in the back.
The Front
MoneySwitch provides a dashboard allowing MSBs (Money Service Businesses), those engaged in the business of converting or transmitting liquidity, to take out uncollateralized loans following the successful completion of MoneySwitch’s onboarding processes. These MSBs can take out permissionless loans up to the pre-agreed credit limit instantly and on-demand. These loans have pre-agreed conditions, and these institutional clients see the dashboard in dollars, receiving dollars straight to their dedicated account.
These MSBs use this liquidity to make global settlements, and this capital framework provided by MoneySwitch allows these entities to leapfrog the current architecture. Until now, MSBs have left dormant capital in bank accounts in every country where they offer settlements. They have estimated the predicted payment cycle and must be right every single time. MoneySwitch removes this pain point allowing MSBs to access liquidity in real-time, turning pre-funded to on-demand.
The Back
MoneySwitch leverages the borderless nature of digital assets and uses several DeFi primitives, such as Circle’s Cross-Chain Transfer Protocol (CCTP). This allows MoneySwitch to leverage Ethereum’s liquidity whilst enjoying the performance of Avalanche and dealing in native USDC. Thanks to the burn and mint functionality introduced by Circle which replaces the less secure and more risky wrapped tokens typically of the lock and mint style bridge. MoneySwitch will use deep on-chain USDC & FRAX liquidity pools to provide our liquidity as a service model.
MoneySwitch has built a capital infrastructure web for MSBs allowing them to make settlements faster and moving them away from the pre-funding model, which currently dominates international transfers, and into the modern era of on-demand liquidity. MoneySwitch has created a borderless global capital corridor infrastructure and serves a market vertical- cross-border payment flows- valued at $155 trillion in 2022.
MoneySwitch has recently onboarded another significant MSB client and will deploy liquidity to aid this entity in making global settlements introducing a web of $12 billion in yearly volume of cross-border payment flows to the Avalanche ecosystem.
Why Avalanche?
MoneySwitch chose Avalanche for two core reasons: performance and security.
Regarding performance: Avalanche’s scalability and sub-one-second transaction finality made the Avalanche C-chain a highly attractive choice. Avalanche’s ability to confirm transactions permanently in under a second make it perfect for MoneySwitch’s institutional needs.
Additionally, Avalanche gas fees remain incredibly reasonable and pair this with the reliability of the chain, which has been successfully operational since the mainnet went live in 2020. It was a straightforward choice.
In terms of broader market influences, Avalanche has been one of the few chains capable of handling the requirements of perps DEXs such as GMX- a testament to its performance. It also has a vivacious community, and that is something that cannot be replicated.
Regarding security: Avalanche’s unique Snowman consensus gives the network a high fault tolerance, and these robust security guarantees were a pivotal factor in MoneySwitch’s selection.
In short, Avalanche’s C-chain offered scalability, flexibility, and security with a finance-orientated design that resonated deeply with MoneySwitch. And this alignment is why MoneySwitch decided to deploy on the Avalanche C-chain.
Want to learn more about MoneySwitch and the changing reality of global payments? Please join us here, and for further information on how to help power the cross-border payments of tomorrow whilst earning yield on your stablecoins, visit us here.
