Startup Lagos

25-Feb-2025

Startup Raises

QED Investors Backs Cedar Money with $9.9 Million Seed Funding for Stablecoin Payment Solutions 2 months ago

Cedar Money, a U.S.-based startup focused on revolutionizing cross-border payments, has successfully secured $9.9 million in seed funding. The investment round was led by QED Investors, a prominent global fintech investor, with participation from Lattice, NIV, Stellar, and Wischoff Ventures. This funding will enable Cedar Money to enhance its stablecoin payment platform, which aims to provide faster and more cost-effective solutions compared to traditional financial systems.

As the latest entrant in a wave of startups leveraging stablecoins—cryptocurrencies typically pegged to established currencies or commodities—Cedar Money seeks to streamline international transactions. The platform operates as a bridge, allowing businesses and individuals to conduct transactions through a fiat-based interface while stablecoin transactions occur seamlessly in the background. With this investment, Cedar Money aims to scale its payment infrastructure and address the inefficiencies prevalent in international payments.

These inefficiencies are particularly pronounced in Africa, where businesses often grapple with high transaction fees and hidden costs associated with currency conversions. Local banking systems add additional risks and expenses, with banks profiting from exchange rate spreads. "If you look at the SWIFT network, fees globally are around 2-3%, but in Africa, they're significantly higher. It's even more burdensome in regions where people have fewer resources," noted Benjy Feinberg, founder and CEO of Cedar Money.

Feinberg established Cedar Money in 2022 after nearly a decade leading alternative financing provider Behalf. His focus shifted toward identifying significant opportunities in fintech, ultimately honing in on payments and blockchain technology. While stablecoins have faced challenges in gaining traction in the U.S. due to limited use cases and competition from established systems like the dollar and SWIFT, Feinberg recognized a different scenario in emerging markets.

In regions such as Africa, the Middle East, and South America, businesses often require U.S. dollars for imports, even when sourcing from countries like China. In nations like Nigeria and Argentina, accessing dollars can be a challenge due to the instability of local currencies like the naira and Argentine peso.

Cedar Money commenced operations in Nigeria in early 2024, focusing on facilitating international payments for businesses in the country. "We aimed to address a significant problem where adoption would be more straightforward. That's why we chose to start in Africa, where the need is most acute," Feinberg explained.

Despite the growing popularity of stablecoin platforms, scaling operations across various markets presents challenges. Feinberg highlighted that while the technical aspects of converting fiat to stablecoins and back again are manageable, the real difficulty lies in navigating compliance with diverse regulatory requirements and extensive documentation needed for legitimate transactions.

In regions like Africa, infrastructure disparities can complicate seemingly simple demands, such as providing a valid street address. "The key challenge is educating banks in developing countries that the funds they receive from less developed regions are legitimate. It's a hurdle, but we are making progress," Feinberg added.

As the U.S. moves toward a more favorable regulatory environment for digital assets, many industry stakeholders believe this trend, combined with strategic acquisitions like Stripe's purchase of stablecoin startup Bridge, could pave the way for broader acceptance of stablecoin payments. This shift may encourage banks and regulators in emerging markets to adopt a more lenient stance on stablecoin integration.

Data from a16z and other sources indicate that stablecoin transaction volumes have surged, surpassing traditional payment systems. In 2017, stablecoin transactions were negligible, but by Q2 2024, they reached $8.5 trillion across one billion transactions, outpacing the combined volume of Mastercard, PayPal, and Visa.

Cedar Money processes tens of millions in monthly transaction volume, primarily focusing on import and export businesses dealing with tangible goods such as rice and shoes. This approach, supported by verified invoices, simplifies underwriting for banks by ensuring that transactions involve clear documentation and physical commodities.

QED Investors partner Gbenga Ajayi highlighted the firm's confidence in Cedar Money, stating that the fintech is "uniquely positioned to tackle the inefficiencies of the global financial system." With a team of 14 staff members spread across Nigeria, the U.S., Israel, and Serbia, Cedar Money represents QED Investors' fourth investment focused on the African market, following Moniepoint, Precium, and Remedial Health.

As Cedar Money joins a growing roster of companies like Conduit and Caliza that offer stablecoin-powered payment solutions in emerging markets, Feinberg emphasizes that despite the increasing relevance of stablecoins, their collective market share in international payments remains small. "Today, two-thirds of international payments occur through the correspondent banking network. The largest fiat innovators capture only 2-5% of the market, while stablecoins represent a mere fraction. The key is not to compete with existing players but to carve out a niche in a vast market," he concluded.

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