Stellar is built to provide access to different financial assets to as many people as possible. Companies offering fintech and financial services, meanwhile, want those services to be as convenient and accessible for users as possible. These interests are aligned, since providing easy, seamless payments is both good for financial companies and our global financial system. And with SEP-24, one of the most popular Stellar Ecosystem Proposals (SEPs), we get closer to that shared vision of a convenient and accessible international economy.
First, let’s take a step back. If you’re not already aware, anchors are the on/off ramps between Stellar and traditional banking rails, or fiat currencies. They allow a user to exchange physical cash or fiat in a bank account for Stellar assets, and, if they so choose, back again. They are key to meeting Stellar’s goal of interoperability, because they connect digital assets issued on Stellar with government-backed fiat currencies like USD or PHP.
Centralized exchanges are themselves on/off ramps, because they allow users to exchange fiat for digital assets. Some exchanges even provide an option to embed their services within a third party company’s app, therefore providing a more convenient user experience. But these solutions are severely limited, because they each use proprietary APIs that require apps to build custom connectivity to each. Proprietary APIs also hamper users’ ability to switch from one platform to the next, reducing competition and getting in the way of interoperability.
Introducing a standard API, meanwhile, can help applications more easily integrate with a large set of on/off ramps.
SEP-24 is that API standard. By implementing it, anchors make themselves available to any app integrating Stellar services, because those apps don’t need to build custom connectivity to each separate on/off ramp. And luckily, implementing SEP-24 will soon be even easier for anchors thanks to the Anchor Platform, which provides pre-packaged software to reduce development time. It was first launched with a cross-border payments API standard, SEP-31.
Let’s imagine a migrant worker in the United States wants to send a portion of her earnings home to her family in the Philippines. She could visit a Stellar anchor with a retail location, convert US dollars into Circle’s fully-reserved dollar digital currency, USDC. She could then send the USDC to her family in the Philippines, and have them pull out PHP at a Moneygram location in their neighborhood.
But what if her family doesn’t need PHP for any immediate purchases? What if her family doesn’t trust the stability of the country’s economy, and wants to hold their money in something more stable?
Well, with the implementation of SEP-24, the anchor they’re using can help them do that. The SEP makes it so the company can embed a Stellar on/off ramp natively within their mobile app, giving the end user more flexibility in when and how they exchange crypto and fiat currencies. This means that the family in the Philippines can off-ramp USDC into PHP, or on-ramp PHP to USDC, within the apps they already use and without needing to visit another app, website, or an anchor’s retail location. The family possesses more flexibility to use USDC as a hedge against fluctuations in local fiat currency, trading fiat into USDC whenever they want if their local economy is unstable.
Companies could integrate Stellar within their applications before, but would have had to do so via proprietary APIs. But with SEP-24, anchor services are automatically compatible with existing wallets. This means that the Filipino family can exchange their USDC for PHP with an anchor of their choosing, allowing anchors to compete on the basis of providing the best user experience rather than by limiting user options.
In order for a company to build a SEP-24 on & off ramp service using the Anchor Platform, they must:
The Anchor Platform, when integrated, comes with the settings provided by the SEPs. However, as the newest SEP, SEP-24, is made available in the latest release candidate for 2.0.
Before SEP-24, it was up to anchors to decide for themselves how their API was structured, often only permitting companies who are willing to work off their standards to integrate those anchor services. But soon, the Anchor Platform will automatically include settings provided by SEP-24, making it so that anchors using the Platform are on equal footing with other anchors when working with third party apps.
SEP-24 therefore introduces more ways to plug in to Stellar services, a win for:
That interoperability brings us all one step closer to facilitating a truly equitable, accessible, global financial system.