Six international banks have laid out plans to issue their own stable coins, or digital tokens backed by Fiat currency, on IBM’s Stellar-powered money wiring service. This was reported by both IBM and stellar. IBM’s Stellar powered money wiring service also plays host to more than 44 international banks that support payments.
IBM’s World wire currently supports more than 47 currencies for payments across different 72 countries. The technology giant plans to further expand the network inorder to provide coverage in 3 to 5 years that will enable people to send and receive money regardless of location at a much reduced fee.
Speaking to a high profile audience at Money 2020 Asia in Singapore alongside Stellar Co-founder Jed McCaleb, IBM Blockchain vice president Jesse Lund revealed that several banks including the 44 that are on the company’s money wiring service have issued letters of intent to issue their own stable coins.
Stable coins became a thing last year, with the ‘crypto winter’ that bit hard throughout the whole of 2018, coupled with crazy price volatility. Stable coins were born to check the volatility of cryptos, and some of them include the likes of Circle’s USDG, Gemini’s GUSD, and Paxo’s PAX which are all backed by the US dollar. JP Morgan also launched the JPM coin earlier this year; though they didn’t out rightly call it a stable coin, it effectively does function as a dollar backed bridge currency for corporate clients as well as other banks with which it transacts.
Some of the banks looking to put out their own stable coins include South Korea’s Bank Busan, Brazil’s Banco Bradesco, and the Philippine’s Rizal Commercial Banking Corporation. Though all these banks intend to issue stable coins, IBM did not reveal whose coins would be backed by the Euro and Indonesian Rupiah.
Lund, in a later interview with Cheddar Monday, went on to reveal IBM’s plans to expand its eco-system for settlement assets by saying;
“We let the market drive the expansion and selection of the network incrementally, we are really feeling excited that we are on a roll to build something new and revolutionary that’s really going to change the landscape of cross-border payments.”
Many in the crypto community have not received the idea of Fiat-backed stable coins well, with most in the community being more in favor of a crypto-backed or algorithmic stable coins because the collateral for funds are kept in custodian banks that in theory could be seized by the government at any point.
IBM’s world wire aims to replace traditional banking intermediaries that add complexity and time consuming hurdles to cross-border payments, making transactions more expensive. Through the use of Stellar’s XLM token as a settlement instrument for fiat currencies, two companies that agree on a transaction can exchange their respective currencies in the XLM token.
The transaction would then take place using XLM, or Lumens and can be recorded on the Blockchain. This will in the end make transactions faster, cheaper, and safer. IBM’s world wire and Ripple which both strive to solve cross-border payment issues differ in that; IBM is not the issuer of the decided upon settlement asset; on the other hand Ripple is the issuer of the decided upon settlement asset.