One of the reasons the Celo community is so excited about the recent launch of the Celo Euro (cEUR) is because it offers people a safer, quicker, and cheaper way to send and receive mobile payments — especially for those without access to traditional financial services.
Take remittances for instance, where an overseas worker sends money home. The remittance market is huge: outflows from the European Union surpassed €53 billion in 2019.
More importantly, each transaction represents a vital source of income, but the receiver can lose valuable funds through fees — the average charge to transfer money from one country to another is 6.5%, while the highest is over 15%. To put this in context, sending €200 currently costs an average of €13, and up to €30 through the more expensive channels. The same transaction using cEUR on Celo costs less than one cent.
Stablecoins are a relatively recent innovation in financial services, and to some they may still seem like an opaque concept. That’s why Deutsche Telekom’s (DT) participation in the Celo network is such an important milestone. By introducing the cEUR to over 240 million customers in 50 countries, DT can build its credibility as a remittance channel while gaining considerable traction.
Celo’s first stablecoin, the Celo dollar (cUSD), shows how cEUR could be used as a channel to send social payments. At the height of the coronavirus pandemic, in June 2020, the Grameen Foundation, a global nonprofit, launched an emergency cash relief programme in the Philippines to support female entrepreneurs. Given the restrictions caused by the pandemic, delivering physical goods was a challenge. So the Grameen Foundation partnered with cLabs to send the peso equivalent of nearly $159,000 in cUSD to 733 beneficiaries who could then spend the money on a custom microsite to buy groceries and other basic necessities. More information about the project can be found here.
The Celo community believes that cEUR could also support other parts of the European financial system.
Trades involving currencies can take up to two days to settle, or even longer on platforms that don’t operate 24/7 and aren’t synchronized. Thanks to the scalability of the Celo network, equivalent trades using cEUR settle within five seconds. And the shorter settlement time should reduce the risk that a trade will fail to be processed according to the agreed terms. The network can only facilitate trades between the EUR/USD pair for now, but the capacity will expand with the launch of new Celo currencies that could include BRL, JPY, and MXN.
With EU interest rates in negative territory, cEUR also presents a compelling case for cash management. Some countries, like Germany, have started allowing institutional investors to gain limited exposure to cryptocurrencies, which could offer an alternative to conventional money market funds in the future.
Decentralized finance — or DeFi as it’s commonly known — has given rise to various new forms of lending. A good example is yield farming, which involves moving cryptocurrencies between lending marketplaces to maximize returns. However, high transaction fees on the Ethereum blockchain prevent many from accessing their funds. On the other hand, withdrawals from DeFi exchanges that use cEUR, such as Moola Market and Ubeswap, are fast and inexpensive.
These are just some of the exciting use cases for cEUR, but it’s still early days. Developers within the community are constantly working on Celo to build new products, so the potential for further innovation is vast. Watch this space.