Today, the Stellar Development Foundation, a non-profit organization that supports the development and growth of the Stellar blockchain network announced a $5m investment in Abra, a leading cryptocurrency wallet and exchange application, as part of an overall strategic partnership between the two organizations.
What is notable about this development is that it is a partnership between two organizations that share a deep seated and profound passion around the role that technology can play in increasing worldwide financial inclusion.
Together, the two organizations have the capability to jointly deploy a cheap and easy-to-access alternative financial infrastructure that can offer financial services to those that are unable to access a bank, or live in countries that either have unstable economic environments or authoritarian regimes that restrict their activities.
Abra - The Robinhood Of Cyrptocurrency
Abra was founded by in 2014 in the Silicon Valley by Bill Barhydt, a former software engineer for Goldman Sachs GS and former director of Netscape.
In 2015, the company, which initially offered a way for people to store and transfer money as easily as sending a text without the need for a bank account, attracted $12M investment in a series A round.
The company grew fast and started to attract attention; in 2018, the Wall Street Journal identified Abra as one of the top 25 technology companies to watch in that coming year.
Since then, the company has completed a series B and C round, filling its coffers with over $47m of funding which it has used to develop its service. Today Abra offers a smartphone accessible investment platform and wallet that provides the ability for customers across the world to invest in 100 cryptocurrencies and 65 fiat currencies.
Abra has solved a major challenge in the adoption of cryptocurrency which is the high level of friction and complexity that is often associated with buying and storing them. By simplifying the experience, Abra has been able to attract mass market appeal which has led to favorable comparisons with the popular retail investing giant, Robinhood.
While Robinhood started off in traditional assets, such as stocks and funds, and has recently started to diversify into offering cryptocurrency investments, Abra has done it in reverse. Abra has been fully crypto-native from the start, only dipping its toe fairly recently — and fleetingly thanks to regulatory fears — into the world of offering investments in traditional financial instruments.
It’s an interesting reminder of how the new world of cryptocurrency and the old one of traditional assets have started to merge.
In addition to utility coins, which can be volatile as they are not asset backed, Abra recently started offering its customers the ability to invest in stablecoins. Stablecoins, which are cryptocurrencies that are pegged to the value of the dollar or other assets, such as gold, maintain a stable value which makes them a good store of value. This enables customers to hold balances in cryptocurrency as an alternative storing in a bank checking account.
An Alternative To A Bank Account?
While it is likely that only the most ardent of crypto enthusiasts in the U.S. would consider jettisoning their bank account in favor of a stablecoin accessible through Abra’s wallet, it’s quite a different matter for those in parts of the world that are experiencing severe economic hardship, high inflation and capital controls, such as Veneuzuela, or who live in communities that do not have access to bank accounts (Brazil’s favelas, for example).
For those that lack access to these basic financial services, cryptocurrency is a necessity, not a hobby.
Abra’s broad appeal means that it can cater to both worlds — a convenient way to access cryptocurrency for those in developed countries, as well as a parallel financial service in those less developed areas.
Abra’s success hasn't been without its challenges along the way. The biggest challenge for Abra hasn't been from the despotic authoritarian regimes of countries fearing capital flight. Instead it has been the from the government in the U.S. where Abra is headquartered.
Last year, in response to regulatory uncertainty in the U.S., the company pulled a number of products that it was offering including removing support for investing in traditional U.S. blue chip stocks and funds, abandoning its approach to representing some cryptocurrencies synthetically, and delisting four particularly contraversial currencies entirely.
New York residents, home of the controversial — and much despised — bitlicense had it even worse. Abra restricted wire services for residents of the states and limited investors to being able to invest in a handful of cryptocurrencies.
It’s no wonder, therefore, that Abra is setting its sights in frontier markets that have a more lax approach towards investing, for better or for worse.
Stellar And Abra — A Shared Mission
With so many cryptocurrencies at its disposal, Abra had the pick of the litter when it came to finding an investment partner. However, during my interview with Abra CEO Bill Barhydt, he emphasized that the shared philosophies of the two organizations around financial inclusion made the partnership a compelling match for both organizations.
This was echoed by CEO and Executive Director of the Stellar Development Foundation Denelle Dixon — “Abra is building a product portfolio of financial services that aligns directly with our mission to create equitable access to the global financial system. They’re committed to providing innovative investment opportunities in underserved, capital-scarce markets. This investment marks the beginning of our partnership to work together towards creating equitable access to financial services that also creates new, innovative business opportunities for the Stellar network.”
Stellar, The Less Bombastic Sibling Of Ripple
While many people have heard of Ripple, fewer will be as immediately familiar with the Stellar blockchain network which has been quietly making great strides without the noise and controversy of its more bombastic sibling.
Like Ripple, Stellar is a public decentralized protocol, focusing on payments which was established six years ago by Jed McCaleb, founder of Mt. Gox and co-founder of Ripple and backed by payment provider Stripe. Initially created as a fork of Ripple (albeit the codebase has been re-written since then), the company has been been focused on deploying its global payments network across the world.
While Ripple has been a constant presence in the cryptocurrency press, having been threatened with class-action law-suits, faced repeated questions about its profitability, all the while hinting at a potential flotation on the stock market, Stellar has been stoically been working on expanding its network, working with partnerships that have included IBM IBM, and Deloitte among other partners.
Stellar For Remittances
The network is getting traction. In a recent announcement, Interstellar, its commercialization arm headed by ex-Zelle founder Mike Kennedy, announced a partnership with a South-East Asia conglomerate to bring $50bn of annual remittance transactions onto the Stellar network in two years time. Remittance is a use case that is very much aligned with Stellar’s financial inclusion ethos, by solving the problem of the high cost of moving money across Association of Southeast Asian Nations (ASEAN) countries which particularly impacts low-income migrant workers sending money back to their families.
Whereas Interstellar’s focus is commercialization of Stellar, the non-profit’s Stellar Development Foundation, which has made the investment in Abra, has a different mission. The foundation is looking to create equitable access to the global financial system. That means that the Abra partnership is much more aligned with the a goal with making the world a better place than generating profits.
Funded with a grant from the Stellar network of of 30bn Lumens (worth approximately ~$2bn), the foundation has already made an investment in DSTOQ Group AG, a platform that provides global access to blue chip stocks such as Tesla TSLA or Amazon AMZN. Interestingly, that’s a similar service to what Abra was attempting to provide before pulling back amid regulatory fears in the U.S.
Neither Barhydt nor Dixon would be drawn on what specific new innovations we are likely to see as a result of the new tie up, commenting only the partnership would focus on the shared mission of financial inclusivity. That suggests that Abra and Stellar will continue on their mission to bank the unbanked. That’s a commendable aim.