By
Godfrey Benjamin
April 24th, 2024
IBM announced that two major US banks may soon offer their own cryptos on the IBM World Wire amidst growing concerns that Ripple’s dominance in this global remittance space may be under threat.
International Business Machines Corporation (IBM) confirmed that at least two “major U.S. banks” may soon follow JPMorgan Chase & Co. lead. The provider of the technology for creating digital currency said that these banks plan to issue a coin for their customers. The partnership between these major banks and IBM to issue tokens presents serious threats to Ripple.
In a Bloomberg report, IBM revealed that the talks with two “major US banks” are in advanced stages. Thus, these financial institutions may soon issue their own cryptos for internal and remittance payments. This IBM initiative that is powered by Stellar’s blockchain is a major threat to Ripple.
Ripple has positioned itself and its XRP crypto as the ultimate future standard for banking remittance payments.
JP Morgan Leads Stablecoins Uprising
With more banks developing local blockchain solutions for instant payments, Ripple may become obsolete. IBM’s vice president of blockchain, Jesse Lund, stated that the company had already held initial discussions with two major lenders. The banks aim to issue the so-called stablecoins. These types of coins are backed on a ratio of 1:1 to an established currency like the U.S. dollar.
The biggest US bank by assets, JPMorgan, has paved the way. In February, we published that the bank had announced its plans to issue a digital currency pegged to the dollar. They referred to the currency as the JPM Coin. JP Morgan’s wholesale payments business presently moves around $6 trillion daily among corporations.
Now, JP Morgan plans to move a small fraction of the $6 trillion through its digital token JPM Coin. The bank said that its coin will use its private blockchain to speed up payments among corporate customers. Digital coins will enable instant transfers of funds between institutional accounts. Hence, settlements times will reduce considerably make it simple to transmit money internationally.
When asked about the two banks in question, Lund said:
“We have received interest on the heels of JPM Coin. The two other banks reached out to us after that announcement.”
He was speaking in a phone interview but declined to name the banks.
The Six Non-US Banks
IBM also said that it is working with six non-U.S. banks on the issuance of digital currencies. As we noted earlier, the six banks plan to issue Stellar-based stablecoins on IBM’s World Wire. Out of the six banks, just three are publically named. They include Banco Bradesco based in Brazil, RCBC based in the Philippines, and Bank Busan based in South Korea.
Lund said these banks await approvals from regulators with some expected to issue tokens in the second quarter of 2019. The new digital currencies can settle transactions between customers of different banks. Banks can also earn interest income and charge transaction fees by loaning the coins. Lund added:
“There’s a new revenue opportunity for banks. Banks are now starting to catch the buzz.”
Stablecoins became popular with the drop in crypto prices that prompted investors to seek safer alternatives.
Possible Identity of the Two Banks
As speculations rise on the identity of these two institutions, commentators agree that Ripple is losing ground. Some of the names suggested include Bank of America Corporation, Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc., and Morgan Stanley.
According to that list, Morgan Stanley and Goldman Sachs Group Inc. stand out. These banks are suspected as the two in talks with IBM due to their past performances in the the crypto and blockchain spheres.
What’s Next for Ripple?
Ripple’s primary purpose is to facilitate frictionless remittance payments and instantly settle bank transfers using the XRP token. The company has run tests with many banks and its blockchain technology is ready for use. However, the major banks keep turning away from Ripple. They stay away because they find it hard to trust a cryptocurrency that is out of their control.
Ripple refers to the whole situation as the “800-pound gorilla.” On the other hand, banks are not yet ready to relinquish control. Hence, only a few of the payment providers use XRP to settle payments. Ripple hit back at the bank-issued cryptocurrencies with the CEO Brad Garlinghouse saying:
“I don’t understand what problem that solves… Just use the dollar.”
As the events unfold and more banks join the bandwagon of developing their in-house stablecoins, the future of Ripple will soon become clear. Until then, the wars and battles for supremacy in the new evolving market will continue.
Who do you think are those two mysterious “major US banks”, and does Ripple really have to worry about the situation? Feel free to share your opinion in the comments.