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IBM announced today that its global payment network, IBM Blockchain World Wire, has enabled payment locations in 72 countries, with 47 currencies and 44 banking endpoints and that it has signed letters of intent with six global banks.
Signed banks include Banco Bradesco, Bank Busan, and Rizal Commercial Banking Corporation to issue their own stablecoins on IBM Blockchain World Wire.
Launched in September 2018, IBM Blockchain World Wire is a payment network built on the Stellar blockchain. Its goal is to clear and settle cross-border payments in real-time.
Marie Wieck, General Manager in IBM Blockchain said:
“We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most. By creating a network where financial institutions support multiple digital assets, we expect to spur innovation and improve financial inclusion worldwide.”
Today more than 44 international banks that support payments are on the service, IBM Blockchain World Wire, and several of them have signed letters of intent to issue their own stablecoins, according to Jesse Lund, Vice President of IBM Blockchain, who made the announcement in a keynote at Money 2020 Asia in Singapore alongside Stellar cofounder Jed McCaleb.
“We’ve created a new type of payment network that is unique in the sense that it streamlines the ability of businesses and consumers to move money around the world in real time. This enables improved transparency without sacrificing the regulatory controls and policies we need in order to make sure that there aren’t bad actors in the system. We are convening a brand new network in 72 countries that will support pay-in and payout end points in 48 currencies.”
The crypto industry’s 2018 bear market resulted in a flood of stablecoin issuances, which seek to keep a constant price in the face of the high volatility of bitcoin and other crypto assets. They include Circle’s USDC, Gemini’s GUSD, and Paxos’ PAX, all of which are U.S. dollar-backed. Last month JPMorgan Chase announced JPM Coin, which it didn’t call a “stablecoin” but effectively functions as a dollar-backed bridge currency for the corporate clients and other banks with which it transacts.
It’s also meaningful that IBM is also partnering with crypto startup Stronghold to issue U.S.-backed stablecoins on IBM Blockchain World Wire. According to a statement issued by Stronghold, instead of “using traditional banking intermediaries to transmit payments” on IBM Blockchain World Wire, IBM’s clients can use Stronghold USD to facilitate settlement. In 2018, Stronghold launched the Stronghold USD, a U.S. dollar token 100% backed by funds on deposit with a qualified SEC custodian.
Many in the cryptocurrency community are critical of fiat-backed stablecoins (as opposed to crypto-backed or algorithmic stablecoins) because the collateral for funds are kept in custodian banks that in theory could be seized by the government at any point; the concept merely borrows from blockchain technology’s distributed ledger capabilities and isn’t truly decentralized. But most people don’t really care about that.
Centralization is OK For the Utility it Provides
Steve Ehrlich, chief operating officer of the Wall Street Blockchain Alliance said:
“At the end of the day, centralization is okay for the utility it provides. One day stablecoins will turn into their own various payment networks that almost become economies in their own regard, like loyalty programs.”
Unlike Ripple, IBM isn’t the issuer of the decided-upon settlement asset. (Ripple issues XRP, the token used to transact over the Ripple network.). Big Blue believes there should be a variety of digital assets to enable cross-border payments and that the network participants should be able to choose and negotiate their asset choice.
And unlike other markets whose central banks use real time gross settlement software with the money center banks of its jurisdictions, wholesale payments in the U.S. are driven more by product, like ACH, than the Federal Reserve.
Pascal Bouvier, managing partner at Middlegame Ventures said:
“If you think that a wholesale coin or digital coupon has the ability to reduce the friction for these types of wholesale transactions, it’s a natural progression to say central banks will want to do that too. How the market structure evolves is difficult to predict, but it’s very much akin to loyalty coins that airlines use for their own purposes.”