In another step toward integrating blockchain into a different component of the financial world, IBM has now announced a restricted phase of its worldwide payments network that will start its pilot phase with Stellar Lumens (XLM).
This payments rail is expected to be another competitor in the real-time cross-border payments sector. It is a space that currently has SWIFT, Ripple, and Stellar working toward a better system – with SWIFT being the only option that has seen mainstream adoption.
Dubbed as the IBM Blockchain World Wire, it should serve as the blockchain-based system that includes the components of payment messaging, clearing, and settlement within one complete system.
According to IBM, the idea is to “clear and settle cross-border payments within seconds – not days.”
IBM Blockchain World Wire
When fully functional, the network should be covering 72 countries, 47 currencies, 44 banking endpoints, and more than 1081 currency trading pairs.
According to IBM, the process should work as such:
Two different financial firms will conduct a transaction, for which they will utilize a stable coin or a digital asset. The digital asset will serve as a bridge between the firms and fiat currencies involved within the transaction.
The digital asset will serve as a key component of the transaction and will carry settlement instructions.
The two firms will not have to migrate to IBM’s new payment infrastructure and upend their current processes. Instead, they will utilize their current system and connect to World Wire via an application programming interface (API). The API would allow for the conversion of fiat into the digital asset, and then back to the intended fiat currency to finalize the transaction. The transaction details will then be recorded on the blockchain forever.
The parties may utilize Stellar XLM or a USD stablecoin for conducting transactions. The tech giant is expecting to add more foreign currency stablecoins after receiving the right clearances from regulatory authorities.
The Benefits of World Wire
IBM sees a clear use case for the utilization of blockchain technology in simplifying clearing and settlement, a process improvement that has been touted by projects such as tZero.
In addition to this, World Wire would allow for more disintermediation, lower costs and a reduction in capital requirements for cross border settlements. The system would have increased security and would be optimal for small and large transactions alike.
The IBM and Stellar protocol will be a partnership to watch for those in the Stellar community as it indicates promise and potential for Stellar.
The price of Stellar (XLM) is up 3% on the news.