IBM launched Blockchain network in “limited edition”

On Monday IBM announced that its IBM World Wire blockchain payment platform is officially accessible in limited production. It has “enabled payment locations” in 72 countries with 47 currencies and 44 banking endpoints. But they aren’t all active quite yet because regulatory approval is still needed for some. “We say ‘limited production,’” said Jesse Lund, IBM’s head of blockchain for financial services, of the project’s status.

IBM says its platform is different from other payment rails in two ways. Firstly it enables messaging, clearing and settlement on a single unified network. SWIFT, for example, is a messaging platform. The second differentiator is that participants can choose from multiple digital assets for settlement. This contrasts with Ripple which exclusively uses the XRP cryptocurrency as the medium of exchange.

The World Wire cross border payment platform uses Stellar’s technology, the network founded by Jed McCaleb, who was also a Ripple founder.

The payment challenge that IBM World Wire, Ripple and Stellar address is the correspondent banking network. Unless a bank has an account with every other bank in the world, it’s going to need to use intermediate or correspondent banks to make some cross border payments. That’s costly and causes hold ups if queries arise along the way. Instead with IBM’s World Wire, a digital asset or cryptocurrency is transferred point to point with settlement in seconds.

“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,” said Marie Wieck, General Manager, IBM Blockchain. “By creating a network where financial institutions support multiple digital assets, we expect to spur innovation and improve financial inclusion worldwide.”

Initially, the platform will support Stellar Lumens and a U.S.Dollar stable coin, the Stronghold dollar.

So the idea is if Brazil wants to transact with South Africa, then Brazilian Reals would be converted to Stellar Lumens or Stronghold dollars and sent to South Africa. And the recipient would convert the Stellar Lumens or Stronghold dollars to South African Rands. Why bother with the Lumens or dollars? Not a lot of people want to convert Reals to Rands, but plenty of people might want to convert Reals to Lumens or dollars if those currencies are being used for numerous currency pairs.

Six international banks have signed letters of intent to issue other currency stable coins for Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real. The banks include Banco Bradesco (Brazil), Bank Busan (Korea), and in the Philipines, Rizal Commercial Banking Corporation (RCBC), and the stable coins are subject to regulatory approvals and reviews.

World Wire may be the first big outing for IBM and Stellar, but Big Blue has been quietly working on this for some time, such as in its pilot in late 2017 with a money transfer operator called KlickEx in the South Pacific region.

It’s all part of former banker Lund’s idea for how IBM will play its part in the future of financial services.

“We are doing a lot of other stuff in the private permissioned space, which is code for enterprise blockchain,” he said. “But this is a different type of system and a different type of network, and IBM is convening this. I mean, this is something IBM has never done before.”

Lund said IBM calls itself the “network operator” while Stellar is really the protocol level. In terms of IBM’s role, this includes maintaining the payment API and some core system software that handles accounts and money flow for participants on the network.

It also helps that IBM has relationships with most of the banks on the planet. Lund also pointed out that IBM is “the single most trusted validator on the public Stellar network today,” meaning many other nodes listen to its nodes about which transactions should occur.

“Look at the Stellar dashboard and see the IBM validators out there,” said Lund. “There’s a lot of others, but everyone trusts us. So in the consensus model, we are kind of a big anchor there.”