Stablecoin issuer ECSA secures $3 million in funding

Brazilian-based stablecoin issuer ECSA raised $3 million to bring the main carry currencies on chain.

The pre-seed funding round saw participation from investors including startup accelerator Y Combinator and Arca, said the company in the release.

A currency carry trade is when an investor borrows a low-yielding currency, also known as a funding currency, to buy a higher yielding currency, such as the Brazilian Real and the Japanese Yen. The trader then pockets the difference in interest rates between the two.

“Funding currencies such as USD and EUR are already well-represented on-chain, we are completing the equation,” said Joao Aguiar, co-founder of ECSA, in the release.

Stablecoins are digital currencies where their value is pegged to a reserve asset such as the US dollar or gold. They have been in the spotlight recently after regulated stablecoin issuer Paxos was ordered to stop issuing its Binance USD stablecoin (BUSD) by The New York Department of Financial Services (NYDFS).

Crypto adoption surges in Latin America

ECSA will start by bringing the Brazilian Real on chain. Its BRLe stablecoin is collateralized with Brazilian Treasury Bills and is held in custody by Itau-Unibanco, which is the largest private sector bank in Brazil.

“BRLe is currently issued on the Stellar network and is in the process of being issued on Ethereum ERC-20,” said Rodrigo Marino, co-founder of ECSA, in the release. “ECSA will be providing a market-making solution to ensure liquidity for the BRLe, making it more easily interchangeable with other tokens such as USDc and USDt.”

The startup intends to pass the returns from the collateral back to the token holders, which the co-founders believe will enable users to perform carry trade operations on-chain and capture the Brazilian sovereign yield.

Latin America was the seventh largest cryptocurrency market in the Chainalysis index last year. Interest in cryptocurrencies is flourishing in countries like Argentina where inflation nearly topped 100% in 2022. Crypto exchange Binance partnered with Mastercard to launch prepaid cards in both Brazil and Argentina, which are both countries where cryptocurrencies are frequently used for remittances.

The funds from the recent raise will be used to expand the footprint of its stablecoins among investors, exchanges and payment processors, the company said.