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IBM Joins in on Blockchain Technology

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The resurgence of cryptocurrencies in the market forces banks and many financial institutions to adjust to the changing landscape of the economy. Among the many aspects that come with digital assets is blockchain, which has become a revolution due to its breakthrough in crypto transactions and exchanges. There may soon come a time when banks create their blockchain platforms for cryptocurrencies, and IBM is starting to pave the path for it.

Instead of trying to pass transactions through several intermediaries, IBM created a global network for digital asset payments and exchange in over 50 countries with its IBM Blockchain, the World Wire network. The new digital system designed by IBM may influence other financial institutions to optimize and accelerate cross border crypto payments, remittances, and foreign exchange. World Wire uses the Stellar protocol to enable money transfers and international payments similar to how conventional banking works. The network is available in a lot of markets today despite IBM announcing its launch on October 2017.

IBM Blockchain General Manager Marie Wieck states that the company started a new kind of network that will help speed up the old process of achieving remittances and change movement of money in a way that the countries will be able to facilitate cross-border payments. Wieck also reveals that IBM’s decision may inspire innovation and provide better financial flow internationally when financial institutions and banks support digital assets.

World Wire is the world’s first blockchain platform that enables integration of payment clearing, settlement, and messaging in one network. Head of IBM Blockchain Jesse Lund believes that blockchain networks make sense for financial institutions as it helps businesses make digital transactions in real time. It also improves transparency while following regulation policies and controls to avoid security risks in the system. World Wire becomes an easily accessible method of payment for cryptocurrency holders around the world. The network is available in over 70 countries and for 48 currencies. It will support pay-in methods and payout endpoints as well.

IBM’s World Wire network can support transactions with the use of Stellar Lumens. IBM’s collaboration with Stronghold can also support settlement using a US dollar stable coin. Lund says cryptocurrencies have the potential to be a credible settlement instrument. Lund also reveals that IBM is already capable of welcoming cryptocurrencies like Bitcoin or Ether, but the addition of the Stellar network asset Lumens will make digital assets more accessible to clients and participants.

Many financial institutions feel interested in trying their hand in the blockchain technology trend as local regulations continue to guide World Wire network through activation. Several international banks like the Rizal Commercial Banking Corporation and Bank Busan are issuing their stable coins in the system after signing the letter of intent documents. The World Wire network will have the ability to make transactions with Philippine Peso, Brazilian Real, Indonesian Rupiah, Korean Won, and Euro upon the approval of the documents.

Rizal Commercial Bank Corporation’s Emmanuel Narciso said his company wants to be an innovator like the World Wire network by issuing Peso stable coins. Narciso believes that World Wire presents RCBC with an opportunity to enhance and transform payment infrastructure as well as add value for their customers.

 

The Effect of the World Wire Network for Consumers

 

World Wire benefits financial institutions because of the network’s ability to send money across borders. Remittances, also known as international money transfers, have a significant impact on the economy. Migrants all over the world send payments of over US$574 billion in 2016. In 2015, the total international remittances for the US alone amounts to over US$56 billion. The US reaches a steady climb every year for the last 50 years in terms of remittances except during 2008, when the world is suffering from a financial crisis.

Despite the apparent need for remittances, people still undergo a slow process to send money to family because remittances need to go through intermediaries for settlement and clearing. The method also adds costs, forcing people to pay for transfer services. The World Wire network provides consumers with a way to speed up the clearing and settlement process by using cryptocurrencies and other digital assets like stable coins to complete transactions and exchanges. Consumers will give up a small number of their assets in exchange for remittance cost and faster operation.

Jesse Lund states that the US dollar-related stable coin is the best asset to use so far. Since World Wire is specifically for international payments, the network needs foreign exchange to assume its duties when dealing with cross border transactions. Most foreign exchanges in the world use US dollars as a basis for the price tag, which means that consumers must accept and be willing to settle for the US currency. Lund also reveals that US dollar stable coin is one-for-one with real US dollar. However, Lund said the dependency on US dollar rates will only be for the beginning phase as the World Wire network continues to get demands from more international banks who want their stable coins on local currencies. The system contains the potential to change the entire landscape of foreign exchange.

Lund stated that the Stellar protocol can provide benefits when using the World Wire network to complete cross border payments. Lund adds that the blockchain technology compliments what IBM wants in terms of its blockchain platform, which is to provide privacy. However, most blockchain networks are public. IBM then realized that they need a protocol which allows them to issue tokens and improve scalability. The Stellar protocol emerged as the best candidate as it gives the network the necessary scalability for transaction volumes, which Lund reveals may end up in over thousands of transactions in a second.

IBM is making a breakthrough in terms of private blockchain networks. It will only take some time for other financial institutions and major international banks to join in on the trend. With improved speed and fewer costs, the World Wire network will thrive on its purpose to provide consumers with better remittance processes.