IBM has inched even closer to bringing blockchain revolution to the banking sector, with a move that could see more banks begin to use the Stellar (XLM) token and other cryptocurrencies.
On Monday, Big Blue announced that six major banks would be issuing fiat-backed stablecoins via IBM’s Blockchain World Wire, a payments network that leverages the Stellar (XLM) blockchain.
World Wire is intended to help banks and other regulated institutions to access or move value across international borders; be it via remittances or foreign exchange. It promises to do away with the attendant complexities of using legacy banking.
Per the IBM statement, three of the six banks in the project include Philippines-based RCBC, Banco Bradesco of Brazil, and South Korea’s Bank Busan.
These institutions, along with the other three to be named later, are expected to issue digital versions of the Euro, the Indonesian rupiah, Brazil’s Real, Korean Won, and Philippine Peso.
The fiat-backed coins will, however, be offered once the banks secure regulatory approvals, the IBM statement noted.
Although the World Wire platform is live, only one stablecoin currently runs on payment network- a USD-backed cryptocurrency issued by San Francisco-based blockchain startup Stronghold.
Explaining the project’s status, IBM’s Jesse Lund noted that at the moment, it’s in ‘limited production.‘”
Even though Stronghold’s dollar-pegged token is used as an on-ramp for the U.S. dollar, the network is at the moment yet to register any pay-in/out end-points in the United States.
However, according to IBM’s head of blockchain, the tech company is optimistic after U.S. regulators’ responded positively, albeit verbally.
That means that the company will focus first on non-U.S. markets, though it plans to “add the U.S. as an operating endpoint.” This will likely be in Q3 or 4 this year, Lund added.
Even then, World Wire payment locations are found in 72 countries, with a total of 48 different currencies used at 46 “banking endpoints.”
The banks joining the World Wire platform will issue their own tokens, but that also means that potentially, these institutions could leverage the lumens, Stellar’s native token, as a “bridge currency.” The possibility arises especially if trading fiat for another proves problematic for one reason or the other.
According to Lund, it is possible the World Wire platform could use other cryptocurrencies in addition to XLM. However, the support is currently limited to the lumens due to the fact that financial institutions are wary of crypto volatility.
While only six banks are in, for now, it appears IBM’s goal is to create an ecosystem that constitutes several bank-backed stablecoins and possibly central bank digital currencies (CBDCs).
IBM has not done this before
The World Wire project is a big one for IBM and Stellar, with the tech giant focused on nailing it since it announced a pilot in October 2017. And Lund says that all these forms part of IBM’s plans to transform financial services.
He noted that the company has done a lot of work with regard to enterprise blockchain. However, the World Wire project is “a different type of system and a different type of network.”
“[…] this is something IBM has never done before.”
A network that allows global banking institutions to support various digital assets could also spur further innovation in the blockchain and crypto space, advancing the idea of financial inclusion around the world.
And IBM could also benefit massively from the success of the World Wire project, given trillions of dollars are transacted across the border every year.
The company is looking to tap into this new transactional revenue source by charging a modest fee on basis points depending on the value a participant moves on the platform.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.